Global View on Billet: Downtrend continues, but slows in some markets

- Billet prices have continued to fall in the global market amid still dropping scrap prices and bearish moods among buyers. However, in a number of markets the downtrend has lost its pace after a very sharp fall last week and amid expectations that the bottom is not so far away.

-  Among the most still actively falling markets was the Southeast Asian import market. Prices have dropped by $35/mt there after a $40-45/mt drop a week ago. More competitive offers and still weak demand have been the major reasons for this. Dexin Steel has made an upgrade this spring to be able to produce 130 mm billet, which is popular in the Philippines, to grab the market share previously held by the Russians. The new offer for 5SP 130 mm billet by the mill was received by a number of customers in the Philippines at $690/mt CFR early this week, while the same size 3SP billet was on offer at $675-678/mt CFR. This is down from last week's tradable level of $710/mt CFR. Moreover, by the end of the week, a deal for 130 mm 3SP billet from Dexin Steel to the Philippines has been reported at $670/mt CFR, signaling customers are starting to slowly respond to competitive offers.

- Russian suppliers have been ready to sell billet to the Philippines at lower levels with sellers’ price ideas at $620-630/mt CFR, but customers in the country are not willing to purchase given the payment and delivery risks. Accordingly, Russian suppliers have been switching to negotiations with China and Taiwan mainly. Offers to China have been heard at $600-620/mt CFR this week, but bids have gone down to $590-595/mt CFR at the highest by the end of the week. The tradable level for imported billet has slipped below $600/mt CFR heard earlier this week even despite some improvements in futures in China on Friday in response to China’s cut of a key interest rate for long-term loans today, which has pushed up sentiments amid the expected help for the construction industry by decreasing mortgage costs for real estate. Prices for imported billet in China are expected to stay low until visible improvement in local quotations, sources believe.

- Following the recent amendments in Iran’s export policy, namely the reduction of the export tariff for billet to two percent, Iranian steel mills have returned to active offerings of steel billet to overseas customers. However, aiming to slow the pace of price declines, this week some suppliers have opted to delay the deadlines for the ongoing tenders. Accordingly, since last week, Iranian exporters have floated around 135,000 mt of steel billet within the scope of export tenders. Although the deadlines for some tenders were indicated for May 15-17, none of them appears to have been closed yet. In particular, having received a bid at $568/mt FOB, an Iranian steel mill has continued to conduct negotiations with a customer, aiming to get a better price.

- Prices for ex-Russia billet have as expected gone down, but overall the pace of the decrease was slower this week amid weak demand and uncertainties in Turkey and the sharp drop last week. Early this week, a deal for 20,000 mt of ex-Russia billet to Egypt came to light as having been done at $685/mt CFR last week. This is down $15-20/mt from the previous contract reported to the country for ex-Russia material, both for LC payment, according to preliminary information. Negotiations have been reported at $670/mt CFR late this week with the freight from the Black Sea assessed at above $50/mt. Moreover, some bids have already slipped to $660/mt CFR or even below. The SteelOrbis reference price for ex-Russia billet has settled at $590-620/mt FOB, where the higher end is for the North Africa market, while the lower end of the range corresponds to only Turkey so far.

-  The billet market in Turkey has not been so active this week, especially on the import side. Buyers have been cautious in new orders, while observing a significant decline in the rebar offers for both local and export destinations and have been holding back their inquiries, contributing to generally low demand. In addition, another decline in scrap has strengthened the expectation for a further drop in billet prices, especially from Russia as dealing for this material involves big risks. This week, import prices declined by $15/mt to $630-640/mt CFR depending on the region and the supplier. Some of the buyers in Turkey believe $620/mt CFR is an achievable level, but the number of negotiations has reportedly been low. In the local market, integrated producer Kardemir sold only up to 25,000 mt of billet at $717-722/mt ex-works, while other mills in Turkey were trying $740-750/mt ex-works early this week. Later on, some sellers decreased offers to around $700-730/mt ex-works, depending on the buyer, order size and seller’s position.

- Indian private sector mills have continued to remain absent from semis exports, while some government mills have reduced prices to $650-670/mt FOB, compared to $690-700/mt FOB a week ago. But sources at the mills said that bids received from buyers in China were as low as $600/mt on CFR basis, while bids from the Gulf region were slightly higher at levels of $620-630/mt FOB, both of which were unworkable for sellers, leading to no deals being reported in the market. RINL floated export tenders for 30,000 mt of 150 mm billet and 15,000 mt of 90 mm billet late this week, with the latest bidding dates being May 24-25.