Global View on Billet: China’s bearish moods impact billet sentiments despite rebound in scrap

The bearish moods have prevailed in the global billet market this week as the major Chinese market has failed to show any improvement and continues to soften. Rebound seen in scrap has also not been enough to provide support in the current weak demand situation in the billet segment.

The SteelOrbis reference price for ex-China 3SP billet has declined by $5/mt in total this week to $415-430/mt FOB. This happened even despite expectations for rebound after the new stimulus measures announced by the Chinese government. On Thursday and Friday, Chinese rebar futures at the Shanghai Futures Exchange lost 1.74% and 1.63% respectively. This happened even following news on Wednesday that the People’s Bank of China will cut the reserve requirement ratio (RRR) for Chinese banks by 0.5 percentage points effective as of May 15 and this will release RMB 1 trillion ($0.14 trillion) in long-term liquidity into the market. The major influence on the billet market in Asia has been coming from the high level of steel production in April and the lack of news about a change in overall demand so far this month. Chinese traders have started again to go short and cut prices.

Ex-Indonesia billet for July shipment has been offered at $430-435/mt FOB this week as the mill has been trying to increase offer a little, but market sources said that the tradable level for ex-ASEAN billet is still hardly above $425/mt FOB with the current weak conditions and China and still available July shipment allocation from Indonesia. The indicative price for ex-Malaysia billet has been reported at $440/mt FOB for July shipment as well.

The SE Asian billet importers have started to be more active in terms of purchases after pause for a few weeks, as they have achieved lower prices from traders, in line with expectations. In particular, around 10,000 mt of Asian 5SP 130 mm billet have been traded at $447-450/mt CFR Manila late this week. This size has been among the most popular and has around $2-5/mt extra compared to 5SP 150 mm billets. This means that buyers have managed to get $5-10/mt discounts from the previous offers at $450-455/mt CFR reported earlier this week. Also, there have been reports about a sale for ex-Russia 125 mm billet to the Philippines, but the final price level has not been confirmed by the time of publication with market sources assessing it at around $440-445/mt CFR.

Trading activity in the Turkish market for import billet has been limited in early May even despite the recent rise in scrap prices, since buyers have been seeing scrap as the better alternative, also considering the long lead times for Asian billet. The latest offers for ex-China billet to Turkey have been reported at $455-460/mt CFR on Friday, which is down from $462-465/mt CFR seen early this week. Nevertheless, rare bids from buyers have been confirmed at $445-450/mt CFR only, meaning that Turkish buyers are not ready to pay higher than in the previous contracts. As SteelOrbis reported in late April, two billet deals for 3SP billet with manganese content of 0.60 percent and wire rod grade billet were done at $452-455/mt CFR Izmir and Diliskelesi. Some market sources believe that $470-475/mt CFR for duty-free Malaysian billet may work in Turkey, but the problem is the long lead time as the material will arrive only in early September at best.

The SteelOrbis reference price for ex-Russia billet stands at $430-435/mt FOB Black Sea, increasing by $2.5/mt from late last week, but overall allocation on the export market has been minimal to absent from some mills partially due to the holidays in Russia and partially as mills have previous got orders. Rare offers to Turkey have been mainly at $455-460/mt CFR, translating to $435-440/mt FOB. Latest deals for small volumes were done about 10 days ago at $445/mt CFR, translating to $425/mt FOB.

Iranian billet market activity has been slow lately with prices hardly moving within the past couple of weeks. One reason is that the demand in the GCC has been modest and the buyers are not in a position to pay far above $440-445/mt CFR, while Iranian producers were aiming to increase the offers to $10-15/mt higher levels. Still, ex-Iran billet prices are now at $410-420/mt FOB depending on the producer with the latest deals reported at $415-418/mt FOB for small and medium sized lots, most probably to the GCC customers.

Indian secondary mills were heard to be submitting offers in the unchanged range of $410-420/mt FOB, but no deals have been confirmed as buyers were deferring contracts, not anticipating any upside in the price line in the short term. Local stock movement of semis in India was slowing down in reaction to softening finished steel prices. But the local trade price is holding, largely owing to efficient inventory management by some large mills controlling the supply side.