Global View on Billet: Bearish mood still prevails in major markets except Turkey

Bearish sentiments have prevailed in most major billet markets due to the ongoing weakness in China, which has failed to rebound and has kept moving down after its holiday. The only exception is Turkey, where buyers have accepted some small increase in billet deal prices, following the latest increases seen in scrap and local rebar prices.

Sentiments in Asia’s billet export market have worsened this week as the expected rebound in local demand in China has failed to emerge and so traders have become more aggressive, offering in short positions, as they believe the downtrend will continue. The reference price for ex-China billet stands at $425-430/mt FOB, down by $5-10/mt over the past week and some sizable volumes have been sold at the lower end of the range or even a few dollars lower. One of the main problems in the Chinese market is high inventory level and strong production volumes, so, even seeing lower margins at mills, most major exporters in Asia have maintained a strong interest in concluding export deals.

A major Indonesia mill managed to sell around 100,000 mt of billets at $430-431/mt FOB for December shipment in the middle of this week. A part of the volume was taken by a trader for sales in Malaysia, and some of the volume was for the local Indonesian market. But the rest of the billet volumes can only have been purchased by traders in positions. In general, the market mood is rather weak as demand showed by end-users in major outlets is still slow, especially for Indonesian billet, which is still more expensive than Chinese billet. The new offer price for ex-Indonesia billet is at $435/mt FOB for January shipment today, October 17, up by $2/mt from the previous day and stable compared to the level seen late last week.

A deal for up to 50,000 mt of Chinese billets is rumoured to have been concluded to Indonesia at $445/mt CFR this week. Some short position offers for 3SP billet have been heard at as low as $440/mt CFR in Indonesia and Thailand, but no other deals have been reported so far. Thai customers might test the water with extremely low bid prices at $425-430/mt CFR. In the Philippines, trading has been rather silent with negotiations held at $445-450/mt CFR, down from the lowest offers at $455/mt CFR last week.

In other major outlets for Asian billet - the GCC - negotiations for Asian billets have continued. Offers from China to Saudi Arabia were at $455/mt CFR, while the previous sale to this destination at least ten days ago was at $457/mt CFR. Also, a deal for Chinese material has been rumored to the UAE at $460-465/mt CFR, but most market sources believe that this level is rather high, at least for Chinese material.

In Turkey, domestic billet prices have settled at $510-515/mt ex-works by the end of the week, while during the week over 15,000 mt were booked at $515/mt ex-works Iskenderun and around 60,000 mt at $500-510/mt ex-works Karabuk depending on the steel grade.

Import offers from China have softened in a few steps by around $10/mt over the week to $457-462/mt CFR for mid-December shipments, while buyers’ price ideas are at $450-455/mt CFR and are not far from becoming workable. Moreover, some sources report that a 50,000 mt sale has been concluded at $457/mt CFR Iskenderun this week. Many sources believe the level should be the market bottom for the time being. Malaysian billet, according to sources, has been sold this week at $488/mt CFR for 18,000 mt for mid-November shipment, versus $484/mt CFR closed in the previous deals to the same region of Turkey. Indonesian material is at $470/mt CFR indicatively, with no interest seen, while the supplier has been concentrating on alternative destinations.

Import offers from Ukraine have also been indicative in Turkey, with one mill offering at $500/mt CFR for December shipments, while another producer is currently not giving offers.

This week, according to sources, over 50,000 mt of ex-Russia billet have been traded to Turkey in several transactions at $455-460/mt CFR for late October and November shipments. Such a level translates to $435-437/mt FOB Black Sea. The new offers to Turkey are mainly standing at $465/mt CFR, amid limited allocation and short lead times. As a result, the SteelOrbis reference price for ex-Russia billet has settled at $435-445/mt FOB, with the midpoint at $440/mt FOB Black Sea, up by $2.5/mt on average from last week.

Indian billet exporters are caught in a double bind of steadily sliding bids as bearish conditions have deepened across most Asian destinations, and further losses in local prices, even as export offers have been kept unchanged, largely considered ‘notional’ in the absence of any export trade activity. Sources said that ex-India billet offers are stable in the range of $430-440/mt FOB but are largely irrelevant when bids are heard at lows of $420-425/mt FOB and a few even lower at around $410/mt FOB, ruling out any trade activity as such bids are at negative margins for Indian mills.