Global View on Billet: Accelerating trade and export tax in Russia make suppliers more bullish

This week has brought a number of surprises to the global billet market, making sentiment more bullish. On September 21, Russia introduced an export tax for a wide range of products, including billets. This has resulted in talk that suppliers may want to increase prices by up to seven percent (in line with the duty now) to offset this impact. And though the acceptance of this hike is questionable, the market has been widely discussing the possibilities for increases. In addition, in Asia, though the Chinese market has fluctuated in a limited range, a number of mills have managed to sell sizable volumes and have decided to hike prices as a result.

Russia’s government has adopted a decision to implement export duties for certain categories of products, including steel and raw materials. The export tax will be applicable from October 1, 2023, until December 31, 2024. The size of duties for is tied to the ruble-US dollar exchange rate and will stand at seven percent, taking into account the current exchange at above RUB 95 to the dollar.

In different sectors, suppliers from Russia have been following different strategies. As for billets, though most sources believe that, at the end of the day, exporters will have to absorb at least part of the value of the tax, sharing the margin with the government, there have been reports of some cancelations and renegotiations of contracts and higher targets voiced by suppliers unofficially. Not many fresh offers have been released just yet, but a few mills have unofficially voiced targets of $490-500/mt FOB, versus the previous deal levels at $470-480/mt FOB last week.

By the end of the week, Turkish market players have been trying to assess the possible effects of the new Russian export taxes and the impact on their cargoes booked for delivery in October. Sources reported some renegotiations have started with no clear details yet. In the meantime, import offer levels for Russian and Donbass billet are not clear and are estimated from $515-520/mt CFR for October shipments and all the way up to $550/mt CFR for immediate shipments. As a result, Turkish market players are waiting for the dust to settle. Aside from Russia, there have been offers from Algeria at $525-530/mt CFR, from Asia at $535-545/mt CFR and from the GCC at $535-545/mt CFR. Sources believe that the alternative origins may be attractive for Turkey in the short term, depending on the situation with scrap and Russian billet prices. In the domestic market, there has been talk about $550/mt ex-works sales in the Iskenderun region, which is up from $525-525/mt ex-works in earlier closed deals. The information has not been confirmed, but many believe these deals have been done, though the price is considered to be on the higher side. Sources report it would have been workable for a $600/mt rebar level, while the latest rebar prices in Turkey are at around $575/mt ex-works.

North Africa has temporarily returned to the billet export market. Earlier this week, Algerian Qatari Steel (AQS) traded around 120,000 mt of billet for October-November shipments at $489-495/mt FOB to several traders as position cargoes. Algerian volumes have already been reportedly offered to Tunisia at $520-525/mt CFR and to Turkey at $525-530/mt CFR. Such price levels may be considered fair at least by some Turkish customers, given the clean origin, shorter shipment period and reasonable offer level.

The leading Indonesian mill hiked its billet offers by $10/mt this week, following deals signed at high prices and seeing strong raw material prices in China. The new ex-Indonesia offer level is at $510/mt FOB for 3SP and $515/mt FOB for 5SP billet, versus the previous $500-505/mt FOB. One of the main reasons for the price increase has been improved trading. Dexin Steel sold up to 50,000 mt of billet at $502/mt FOB, then around 20,000 mt were traded at $506/mt FOB and further sales of 60,000-80,000 mt have been reported today at $506-510/mt FOB. The recent sales to traders have been partly for the covering of short positions, while part is for the futures sales. Ex-Malaysia offers have been confirmed at $510/mt FOB for both 3SP and 5SP, slightly below Dexin’s offers.

Ex-China 3SP billet tradable levels are at $500-510/mt FOB after increasing by $5/mt early this week. Local prices have fluctuated in a limited range, following futures prices. 

The situation in the import billet market in Southeast Asia has improved a little this week and, even though overall demand has remained slack, some buyers have decided to purchase limited volumes, seeing prices are going up. The tradable level for 5SP 130 mm billet in the Philippines has increased to $515-520/mt CFR this week, versus $510/mt CFR last week. Negotiations with a trader at $519/mt CFR Manila have been heard. The latest Russian 3SP billet sale from Far East ports has been done to Taiwan at $500/mt CFR, which is almost in line with the previous offers of $500-505/mt CFR, but above the previous sales at $495/mt CFR. An ex-Iran 10,000 mt billet sale has been reported at around $505/mt CFR Thailand, while the previous sales for this origin in Southeast Asia were at $498-503/mt CFR.

This week, no fresh billet export tenders have been closed from Iran since buyers are waiting before restocking. One of the mills has announced a tender for 30,000-60,000 mt billet valid until September 25. The shipment is in the first half of November, according to the announcement. Some sources have reported that the supplier has been looking to sell above $475/mt FOB, but has received several lower bids. In the domestic market, the 10,000 mt billet offer for October delivery has been placed in the exchange market at around $465/mt ex-works (IRR 21,500/kg) with no takers seen so far. In Asia, Iranian billet has been sold at $505/mt CFR Thailand for 10,000 mt, versus previous sales at $498-503/mt CFR to the same region.

Ex-India billet reference prices have been maintained at $505-513/mt FOB, the same as last week, with mills’ targets closer to $515-520/mt FOB, but trade activity has lapsed into silence and sellers have been refraining from submitting offers amid the rebound in local merchant sales. Even though a government-run mill floated a new tender for 90 mm billet, the market remained unenthused, expecting the highest bid to be closer to $500-505/mt FOB. In the local market, merchant billet prices have recorded a strong performance gaining INR 1,000/mt ($12/mt) to INR 47,000/mt ($564/mt) ex-Mumbai.

* - deal prices