Sentiment among CIS-based billet exporters has weakened on Friday, October 22, following the collapse of the Chinese market, the appearance of large volumes offered by Chinese traders to Turkey, and the overall gradual deterioration of sentiment in Turkey. As a result, further price increases for ex-CIS billet are doubtful for the short term.
Offers from the major large mills in the CIS have been rare, in the range of $675-700/mt FOB Black Sea. The positive start to the week and the limited allocation for shipment up to the end of the year have made suppliers cautious as regards making offers. The tradable level has reached up to $670/mt FOB, but trading has been inactive as sentiment has been hit hard in the middle of the week by the collapse in China and the slowdown in Turkey.
Moreover, challenges are increasing on the transportation side, with some suppliers unable to find cargoes with small volumes, while freight keeps surging. Freight rates from the Black Sea to Turkey are in general at around $35-40/mt and above $50/mt for Iskenderun.
The square billet market in Turkey has slowed down, following the rather bright development last week. The key reason is the financial and currency situation in the domestic market, which has brought more uncertainty to the rebar business specifically. Ex-CIS offers have settled at $700-715/mt CFR Turkey, although the number of these offers has diminished by the end of the week. The workable levels in the northern part of Turkey are at $690/mt CFR for small lots, while a re-roller in the Izmir region has reportedly booked a cargo at $700/mt CFR.
By the end of the week, information about huge billet volumes being and about to be offered to Turkey by Asian traders has been actively discussed in the market. Although the overall situation is considered to be disturbing, most sources do not expect Turkey to book large volumes. “Those billets were not booked at cheap levels and, with the current freight and lead times, selling to Turkey may mean a big loss for traders, so eventually they might sell to closer markets,” a trader told SteelOrbis. In addition, with the recent negative developments with the lira exchange rate, some sources doubt that Turkey will be eager to import big lots of billet, also in a situation when longs sales are generally slow. The prices for billet from Asian traders vary depending on the origin from $690/mt CFR to $705-715/mt CFR, which is more or less in line with the ex-CIS levels.
Other concerns from the recent price collapse in China are linked to the previously booked ex-CIS billet to China in September ahead of the Chinese holidays. The total volumes from the Black Sea in those deals came to 200,000 mt or more, so if customers cancel contracts or try to redirect cargoes this would exert strong pressure on the market.
The possibility of an increase in supply, when CIS mills will start to offer for January shipment, also exists and this may put pressure on prices, as demand from neighbouring markets apart from Turkey, like North Africa for instance, is unlikely to improve. At the moment, the tradable level to this destination is $670/mt CFR with the freight not less than $50/mt.
The SteelOrbis reference price for ex-CIS billet stands at $670/mt FOB Black Sea, down by $2.5/mt today, but $10/mt higher compared to last week.