Global View on Billet: Bearishness prevails in all major outlets, outlook still not bright

The downtrend in the global billet market has continued this week even though prices had already posted significant declines over the previous few weeks. The still bearish mood in the scrap segment and traders’ aggressive pricing in some destinations like Asia signaling that the billet price downtrend may continue in next week too, though in general the space for a decline is more limited now.  

Ex-China billet prices have continued to decrease, following continuous losses in the local market, making traders more aggressive and, as a result, the outlook for the Southeast Asian market in general has remained bearish, even though major ASEAN-based mills have kept offers for billet stable after the sharp drop last week. Ex-Indonesia billet offers from the major domestic BF-based mill have remained at levels of $565-570/mt FOB, similar to what was announced last week. There has been a rumor about of a sale at $560/mt FOB, but this has been heard as done to Latin America.  

At the same time, the tradable level for ex-China billet has lost $15/mt over the past week, coming to $550-560/mt FOB. The import market has remained at a complete standstill with the tradable level sliding below $500/mt CFR.  

Though in general mills’ FOB prices for billets in China and the ASEAN region have not fallen sharply since last week, import quotations in the Southeast Asian market have continued to lose ground rapidly. The main reason for this is the aggressive policy of traders, who are offering in positions, trying to liquidate stocks in the negative market. Most offers for 5SP 130 mm billet have been reported at $560/mt CFR from a number of traders and have been confirmed by most end-users. One deal for ex-Dexin material has been rumored at this level, but no confirmation has been available so far. Some sources said that importers are silent in terms of bids, while some believe that in these conditions new bids would be at $555/mt CFR maximum.   

Prices for import billet in Taiwan have declined by $7/mt in a new ex-Russia deal and even lower offers have already emerged in the market. In particular, "a sizable lot" of billet from Russia’s Far East region was traded at $565/mt CFR early this week, SteelOrbis has learned from the market, which is down from the $572/mt CFR deal done for short position ex-Indonesia material early last week. The producer was offering at $575/mt CFR to Taiwan last week, and, seeing the rapidly falling market, it was rushing to sell before a new low would be reached, sources have said. After this deal and lower offers seen in the market at $560-565/mt CFR, Taiwanese buyers have been assessing price ideas at $555-556/mt CFR if they need to restock.   

Ex-Iran workable prices for billet have decreased this week as expected. The key reason is the unfavourable price and demand situation in most regular outlets, such as Asia, Turkey and partially the GCC. As a result, while initially Iranian mills aimed to sell at $560/mt FOB and later on decreased their price ideas to $530-540/mt FOB, buyers managed to push for even lower levels. According to sources, this week two Iranian producers sold a total of 60,000 mt of billet for May shipments at $518/mt FOB. Moreover, additional large sales have been reported at $515/mt FOB and $512/mt FOB. As for CFR levels for ex-Iran billet, the levels estimated for Asia are at $565-570/mt CFR, which is normally workable, but the buyers will most probably wait due to the weak market. In Turkey, the latest offers have been reported at $560-570/mt delivered with no deals heard. In the UAE, the latest levels are at $600-610/mt CPT, netting back to $570-580/mt FOB for position cargoes.  

Ex-India billet prices have gone down again over the past week amid nervous sentiments in Asia and low business activity in the Gulf, while sellers also did not push aggressively to conclude deals preferring to wait for a turnaround in the bearish market conditions. Some private mills have adjusted ex-India prices to $530-550/mt FOB, against $540-560/mt FOB, but negotiations have been limited with most bids from Asian buyers sought valuations in the range of $540-560/mt on CFR basis.  

In Turkey, the week once again failed to bring any improvement both in terms of prices or market activity, though import scrap pricing has started to gain more clarity. Raw material prices have moved down, expectedly bringing down the costs of captive billet production and, consequently, bids for import semis. The offer range in the import billet segment has been mainly at $580-595/mt CFR for ex-Donbass and even up to $600/mt CFR for Russian and ex-Donbass material, while bids from buyers have dipped to $570/mt CFR. Some sellers, however, are quite confident that levels not so far away from $590/mt CFR would be accepted by Turkish buyers, especially re-rollers, given that there is a certain lack of billet in the market. In fact, Turkish steel producers are now carefully evaluating import scrap prices in order to understand what the billet price should be according to their own cost for future production. With scrap at $430/mt CFR, the billet cost is estimated at $600-605/mt ex-works for the medium-size Turkish mills and at $590-595/mt CFR for the large producers. As a result, the workable import offers should be at least $15-20/mt lower and even larger discounts will be pushed for when toxic origins are in question. In the local market in Turkey, billet prices have dropped to $630-640/mt ex-works from around $640-660/mt ex-works previously. In the export segment, $620-625/mt FOB may be considered, but no interest has been seen at these levels.  

As for Russia, the FOB price level has settled at $560/mt FOB by the end of the week, narrowing from $560-570/mt FOB seen previously. Turkey remains the key targeted market, but no actual deals have been confirmed this week as buyers have refrained from impulsive purchases. Taking into account the downturn in scrap prices in Turkey, many believe that import billet has room to decline by around $10/mt or even more, which will then result in a livelier business activity. In other regions, Russia is either failing to compete with other origins, like with Asia in Latin America, or is forced to sell at low levels. In particular, in the Far East, an ex-Russia cargo has been sold to Taiwan at $565/mt CFR and the new bids are expected at even lower levels. In North Africa, import billet demand has stalled amid slow long product sales and the ongoing Ramadan period. It is worth mentioning that Russia’s Metalloinvest, which had not been under sanctions previously, will most probably be considered as a toxic origin from now on, since the holding and all of its assets have been listed in US sanctions.