Optimism has strengthened in the CIS billet export market by the end of this week as deal price levels in China have reached a new high and, despite increased freight costs, sales to this destination will be a major focus for mills from the Black Sea region in the near future.
A contract for 40,000 mt of billet from Russia’s Far East region was done at $720/mt CFR yesterday, up by $15-20/mt from deals for ex-CIS billet done earlier this week. New offers from most large international producers to China have reached $730/mt CFR and they aim to get $725/mt CFR in next deals.
Though no new bookings have been reported for ex-CIS billet from the Black Sea region, the major mills are in negotiations, sources have said. “The issue is allocation and freight. There are not many volumes available in the market apart from those from big mills, who may sell directly,” a trader said. Moreover, one source said that there are some technical issues at one of the major CIS mills, which could drag down allocation.
As the freight from the Black Sea to China is assessed now at up to $100/mt, including charges for quarantine for 14 days at least at Chinese ports, the current $720/mt CFR level translates to $620/mt FOB Black Sea. Most market sources believe that Chinese traders will continue purchases next week since no easing of production cuts is expected any time soon. But the tradable level will strongly depend on local billet prices in China and on futures price dynamics.
Demand from Turkey and North Africa is not supporting CIS-based billet exporters. The tradable price level in Turkey has been at $612-620/mt CFR, as reported earlier this week, while the market in Africa has been described as “almost dead.”
The SteelOrbis daily reference price has increased nominally by $5/mt today to $595-620/mt FOB, with the midpoint at $607.5/mt FOB, mainly due to the higher tradable prices to China.