After lasting declines, ex-Russia billet prices have rebounded this week, though the reasons behind this were not improving fundamentals, but just the absence of low offers seen last week and the cost-driven uptrend in Turkey which started to emerge from today, September 1.
In Turkey, which has been the key sales outlet for Russian billet in the past six months, the market situation is on the one hand promising and on the other hand disturbing. The announced 50 percent rise in electricity and gas tariffs for local industries in Turkey is expected to significantly push up domestic mills’ production costs, which were already high. As a result, EAF-based billet production is foreseen to diminish, and at least there will be less semis for sale in the free market. This may give a boost to billet imports, especially by Turkish re-rollers who will not have much choice, and Russia is a sustainable available source despite international sanctions. Billet from Iran and the GCC may be also in the picture, but high freight rates and long lead times usually reduces their competitiveness. On the other hand, despite wider opportunities for ex-Russia sellers, generally the demand and prices for billet in Turkey are expected to be limited by low longs demand and overall lower finished steel production.
As a result, in the short term, prices in Turkey are expected to increase, following also higher rebar prices, which are already rising to $700/mt FOB and above. While earlier this week the levels of $565-575/mt CFR from Russia and $550/mt CFR from Donbass were voiced in the Turkish market, today the expectation for suppliers’ price ideas is at $600/mt CFR minimum. Overall, taking into account the limited number of sellers, the offers may even go $20-30/mt higher than that.
Some bids have been voiced at $535-550/mt CFR earlier this week, while some assume that $560/mt CFR was also acceptable. Late last week, the Turkish import billet reference price was at $530-550/mt CFR and small deals were done at $530-540/mt CFR.
But even before the announcement of new electricity and gas tariffs in Turkey, such low offers from Russia seen last week from one supplier had disappeared. The SteelOrbis reference price for ex-Russia billet was increased by $15/mt yesterday to $510-515/mt FOB. Today, it has been hiked further, by $10/mt to $520-525/mt FOB.
“I believe [Turkish] mills will try to increase prices [for finished steel]. If they failed, they would wait and postpone new scrap purchases. At the same time, import billet may become more economically attractive as their own costs of billet production would be even higher than earlier,” a trader said.
Apart from Turkey, demand for ex-Russia billet has been near to dead. Far East Russian suppliers have withdrawn offers or have increased them sharply to $530-540/mt FOB Far East Russia, while earlier this month these levels but on CFR basis were seen from Russia in Southeast Asia and Taiwan.