Though major ASEAN mills have not announced new offer prices yet this week, following the drop in the Chinese futures and local spot prices on Tuesday, June 11, after the Dragon Boat Festival, the tradable level has clearly softened and the market sentiment is negative.
The ex-Indonesia billet price is assessed at $495/mt FOB at the moment, versus official offers at $500/mt FOB last week. But new deal prices are expected to be around $485-490/mt FOB in the current conditions. “No new price from Dexin due to the sharp fall today. I think they'll accept $495/mt FOB,” a Singapore-based source said. Another major Asian trader has said that he expects $490/mt FOB in new transactions, as “deals have already been at $495/mt FOB, so mills will need to reduce a little bit more to sell."
Also, the Malaysian mill is reported to have sold around 40,000 mt of billet at “below $500/mt FOB,” but this could not be confirmed by the time of publication. Most traders polled by SteelOrbis assess the tradable level for Malaysian billet at $490-495/mt FOB now.
But even though most market sources agree that prices for billet from the ASEAN region have space to go down, if the major mills manage to rapidly push volumes for shipment in the rest of July, this may help them not to drop offers too much, even in the case of continued weakness in China. In particular, at the moment, there are inquiries for billets from Latin America for up to 80,000 mt and negotiations have started from $500/mt FOB, which translates to $560-570/mt CFR, including freight and extras.
The ex-China reference price for 3SP billet stands at $480-490/mt FOB, down by $10/mt from yesterday. “Trading has not been booming, but it is possible,” a local source said. The average local billet price has settled at RMB 3,413/mt ($480/mt) ex-warehouse, dropping by RMB 42/mt ($6/mt) from the previous day, according to SteelOrbis’ data. The drop in billet prices in China has organically followed the drop of 1.77 percent in rebar futures at Shanghai Futures Exchange today. “The slow demand season has started, plus macroeconomics have influenced steel prices and it seems steel inventory pressure is up again from June,” another large trader from China said. Even further talk about steel production cuts and possible reductions of supply itself have failed to support steel prices, while such talk has dragged down iron ore prices even more. The expectations that the latest supportive measures for the real estate sector will help to at least sustain steel consumption in China have faded away for now.
In addition to billets, the bearish mood is stronger in the slab segment too. In particular, at least two sources reported negotiations for ex-Indonesia slabs at $500/mt FOB, versus offers reported over the past two weeks at $510/mt FOB. Ex-Malaysia slabs are offered at $510/mt FOB, down by $5-10/mt from last week. Offers at lower levels, especially to Europe, are still rare as mills are trying to assess the situation first and are not in a hurry to cut prices in Europe, where HRC prices are anticipated to improve.
$1 = RMB 7.1135