Russian billet sellers have found themselves under even more pressure this week since scrap prices have once again decreased significantly and buyers have been pushing for more discounts, also due to their own slow long product sales. However, although the discounts for billet had been anticipated, the prices have gone down somewhat deeper than expected. Specifically, this week Russian sellers of billet from Ukraine’s Donbass origin have been aggressive and have collected some orders, particularly from Turkey and Egypt, but were forced to cut their prices significantly.
In Turkey, according to sources, a customer agreed to pay $565/mt CFR for 18,000 mt of billet, while another 3,000 mt were sold at $585/mt CFR Karabuk region. Both cargoes are said to have been traded by Russian sellers and for billet from Ukraine’s Donbass region. Earlier this week, the same suppliers were offering at $580-590/mt CFR, while some suppliers of specifically Russian origin billet were at $600/mt CFR and now it seems they have stepped away from active negotiations. “There is no point in selling in my opinion as the Donbass team is very aggressive. We pulled back and let them enjoy the party,” a source said. Freights to Turkey for small lots are at $42-45/mt to the northern part of the country, at $50-55/mt to the Izmir region and at around $60/mt to Iskenderun. The latest import deals net back to $530-540/mt FOB, SteelOrbis estimates.
In Egypt, import billet prices have continued to decrease gradually. First, the level of $620/mt CFR was negotiated, $20/mt down over the week, while later a 6,000 mt cargo was reportedly booked at $610/mt CFR. In addition, according to the latest information, another 3,000-5,000 mt have recently been sold at $595/mt CFR. All the mentioned deals were handled by a Russian trader and, according to sources, once again were for billet from Ukraine’s Donbass region and for prompt deliveries. Some sources believe the cargoes will be shipped in 3,000 mt lots from Russia’s Rostov port and the freight is estimated at $70-80/mt. As a result, the estimated FOB level for these sales is around $525-530/mt. By the end of the week, bids from Egypt have already dropped to $580/mt CFR, which translates to $520-530/mt FOB Black Sea for larger volume cargoes.
The import billet prices in both these markets, despite being already low, may weaken further, sources expect. Ironically, although there is no alternative to Russian and ex-Donbass billet in the region (with the small exception of rare lots from Iran), the prices for these are under great pressure, first of all because buyers are well aware the suppliers are desperate to sell in order to get some cash flow and their options are limited to only a few outlets. Second of all, the sanctions-related risks are huge for the buyers, which is considered to be a good justification for them to push for lower prices.
Slow rebar sales and falling scrap prices put additional pressure on the Russians, although the usual price correlation of billet and these products has disappeared. “In the case of Russian billet, there is no correlation with rebar. Turkish mills, let’s say, are at around $700/mt FOB for rebar, while the rolling cost of $50-60/mt would mean $640-650/mt CFR for billet, which is definitely not the case,” a trader told SteelOrbis. In Egypt, the local rebar prices are at around $825-855/mt ex-works and the rolling cost from billet to rebar is around $60/mt.
As a result, the SteelOrbis reference price for ex-Russia billet has settled at $520-540/mt FOB Black Sea with the midpoint at $530/mt FOB, down by $27.5/mt from early this week and $50/mt over the past week. Though the lower end of the range ($520-530/mt FOB) corresponds mainly to ex-Ukraine Donbass billet sold by Russian sellers, the volumes in question are big now and they are reflecting the real market level. At the same time, the higher end of the range has been lowered to just $540/mt FOB as other Russian billet exporters have decided to stay away or assess the market at a higher level.
