Global View on Billet: Downtrend accelerates

- The global billet market has posted more significant price declines this week, reacting to the downtrend seen in the local Chinese market, more scrap deals at lower levels, and still bearish sentiments. The weakening of steel demand globally has had a negative impact on the billet market, which is unlikely to change in the coming week.

- The sharp declines seen in futures and spot billet prices in China have resulted in a sharp fall in export offers for Chinese semis. Ex-China tradable 3SP prices have dropped to $520-530/mt FOB, down by $30-40/mt over the past week and down $20/mt since last Friday. At the same time, there has been information about traders’ short sales at $530/mt CFR Manila. This means that traders expect that FOB levels from Asian mills will keep going down to $500/mt FOB or so. Chinese mills have started production cuts, which amounted to up to 50 percent in Tangshan, which has put pressure on raw material prices, and on steel prices as a result.

- The leading Indonesian mill has also cut its official prices - from $565-570/mt FOB to $545-550/mt FOB first, and then to $540/mt FOB by the end of the week. But market sources said that it is possible to get $530/mt FOB from Indonesia or Malaysia under negotiations. ASEAN-based mills are not targeting Asia due to Chinese traders’ lower offers, but are considering sales to Latin America or East Africa instead.

- The SteelOrbis reference price for imported billet in Southeast Asia has settled at $525-540/mt CFR, with the midpoint at $532.5/mt CFR, down by $27.5/mt over the past week. A number of offers for open origin 5SP billet (BF/EAF/IF) for July shipment were heard from traders at $535-540/mt CFR Manila early this week and some sources have reported even a few short position sales at $530/mt CFR to the Philippines. By the end of the week, some short position offers have already been reported at $525/mt CFR Manila, while counterbids are at as low as $500/mt CFR. The higher end of the reference price range corresponds to the lowest possible non-short position offers.

- Iranian semis exporters have floated two tenders this week in addition to the one still valid from last week. Totally, around 80,000-130,000 mt are in the market for sale from Iran, but it seems the takers are few for now. The latest reported transaction was closed at around $500/mt FOB for 25,000 mt last week, but this week the workable prices have declined. In fact, several sources have reported bids at $480/mt FOB, and some at $485-490/mt FOB which were not accepted by the suppliers. However, most market players believe this would be a fair price for ex-Iran billet under the current conditions when the market has been weakening globally.

- Ex-India billet prices have dropped down over the past week but the reductions have been termed “notional” in the market in the almost near absence of buyers amid pessimistic sentiments and cheaper alternatives available in most Asian destinations. Ex-India billet prices have been reported in the range of $520-530/mt FOB as sellers reversed the failed contrarian strategy of the earlier week of hiking prices to $540-550/mt FOB. The current FOB prices translate to producers’ assessment of the market, taking into account the drop seen in major export markets like Asia and the Middle East, but the number of firm offers from India has remained limited. Bearish conditions have spread in the local market in India and recent gains have been wiped out even though trade volumes have improved gradually.

- By the end of the week, ex-Russia daily reference prices have decreased by $5/mt to $540-550/mt FOB. Turkey has remained the main targeted outlet, given the currency problems in North Africa. However, some large inquiries are expected to come from Latin America in the short run. In Latin America, billet buyers are expected to target below $600/mt CFR for Russian billet, while the previous ex-ASEAN deals were closed at $610-615/mt CFR. Fresh offers for billet from Russia’s Far East region to the Asian region have been at $535/mt CFR, with the possibility of falling to $530/mt CFR.

- The import billet segment in Turkey has remained rather slow in terms of business. One issue is that the buyers are not interested in large-volume bookings due to falling import scrap prices, while another is that there are not many suppliers in the market, especially for near shipment dates and short lead time. As a result, only small lots have been traded this week from Russia and Donbass, and the workable prices have dropped to $560-575/mt CFR and only some sellers managed to achieve up to $580/mt CFR. Previously, Russian suppliers were targeting up to $580-585/mt CFR minimum, but failed to achieve these levels. Still, there are a lot of discussions in the market regarding the future of Russian suppliers, given the recent case against Metalhouse trading company and the sanctions applied against Russia’s Metalloinvest. Many believe that ex-Russia sales will continue to certain Turkish customers, but price-wise the sellers may have to fall in line with ex-Donbass cargo prices.

- In the Turkish domestic market, integrated producer Kardemir has traded close to 50,000 mt this week at $610-615/mt ex-works, down from $630-635/mt ex-works in the previous round of sales. The other local producers are not active in the market, not being willing to sell at low levels while import scrap prices continue to fall. However, the general workable level for Turkey is estimated at around $600-620/mt ex-works.