Global View on Billet: Downtrend continues, huge decreases still seen

- Prices for billets in the global market have continued to drop this week and the declines are still huge even though there was talk that prices are near to costs of production and not all mills will be able to follow the rapid downtrend. But critically weak sentiments due to slow demand and falling scrap prices have been exerting pressure and so in the major markets the bearishness may continue next week also, according to market sources.

- This week, the sharpest price drop has been seen in Southeast Asia, with prices losing $60-65/mt over the week to below $600/mt CFR, which was quite unexpected for many market sources. Offers for ex-ASEAN EAF/BOF billets of 130 mm and 150 mm have been reported at $575-590/mt CFR Manila, though most of them are from traders, while only some mills can consider such a low level. Two major factors behind this drop were weak demand in Southeast Asia and the negative situation in China, with the absence of demand for imported billet there. There has been no information about new deals in the market, with only one sale at $610/mt CFR Manila done late last week having been heard, but not confirmed.

- In the local Chinese market prices have lost a huge margin of RMB 365/mt ($54/mt) over the week to RMB 4,020/mt ex-warehouse, according to SteelOrbis’ data. Following the sharp drop in local billet prices in China, driven by extremely negative sentiments in the spot and futures markets, buyers’ price ideas for imports have fallen to $510/mt CFR and below, so that even the ex-Russia deal reported last week at $535-540/mt CFR was considered on Friday by most market sources to have been at a high level already. As a result, the reference price for import billet in China has settled at $510-520/mt CFR by the end of the week.

- Even though Chinese billet suppliers have cut export offers by $50/mt, the offers have been considered as too high for Asian customers and not competitive with ex-ASEAN origin billets. The majority of billet export offers from China have been at $600-630/mt FOB, down $50/mt since late last week. Some sources said that, to find a $590/mt FOB offer is also possible, but with the freight to Southeast Asia at around $30/mt, even this level translates to $620/mt CFR, while the tradable level in Southeast Asia is below $600/mt CFR.

- With power generation-related challenges during the summer period becoming more apparent in Iran, Iranian steelmakers have stepped up their efforts to search for overseas customers. Accordingly, lately around 130,000-170,000 mt of ex-Iran steel billet has been floated by Iranian steelmakers within the scope of export tenders. Iranian steel mill Khouzestan Steel Company is reported to have closed its export tender for 40,000-50,000 mt of steel billet, for delivery at the end of August, at $530/mt FOB, down $10-20/mt from SteelOrbis’ price assessment for ex-Iran steel billet last week. But since the global market is falling rapidly, customers are expected to start testing the market with levels for ex-Iran billet at $500/mt FOB and lower, according to sources. By the end of this week, market sources have already been assessing the tradable level at $500-510/mt FOB, and hardly higher.

- In view of the further fall in billet prices across Asia, tradable levels for ex-India billet on the sellers’ side have decreased to $570-590/mt FOB, compared to $580-610/mt FOB last week, but, even though some private mills are ready to deal at these levels, customers have been asking for even lower prices.

- Prices for ex-Russia billet have continued to fall despite the huge losses already seen last week. Bearish sentiments in both finished steel and scrap segments and critically weak demand have pushed billet prices down. But some suppliers from Russia have decided to withdraw offers for now, assessing the market and the rationality of export sales. The SteelOrbis reference price for ex-Russia billet has been lowered to $490-510/mt FOB Black Sea on June 24 with the midpoint at $500/mt FOB, which is down by $30/mt on average from last week. Some of sources said that the deal price level has already fall to $460-470/mt FOB due to scrap drop late this week, but this information has been denied by a number of sources who said this is under the costs of most mills, taking into account strong Russian currency. The lowest deal for ex-Donbass billet was heard by market sources as being concluded to Turkey at $520/mt CFR this week, with the freight at $30-40/mt.

- Billet prices in the Turkish market decreased from $565-585/mt CFR last week to $535-550/mt CFR first and $520-550/mt CFR by the close of the week. Mainly the sellers of ex-Donbass billet remain in the picture, while other mills have decided to watch the market for now. An earlier rejected cargo of 18,000 mt and offered to the market since the past week, has created a lot of confusion in the market. According to the latest information, this tonnage has been resold to Turkish Izmir-based buyers at $520/mt CFR and $535/mt CFR. But earlier in the week, it was reported that a contract for part of the volume was done to Tunisia at $565/mt CFR. The latest offers at $540-560/mt CFR from mills for ex-Russia billets in Turkey are considered by sources as too high, as the negative sentiment in the scrap market continues, and local and export rebar prices have continued falling this week.

- The same market factors continue to weigh on the positions of Russian billet sellers in the MENA region, particularly in Egypt. Following the deal at $595/mt CFR closed last week, offers declined to $570/mt CFR versus bids of $550/mt CFR seen in the middle of the week. After the recent scrap price drop, the market sources believe that even $530/mt CFR will be hard to achieve in Egypt even though local prices are at $800/mt ex-works Egypt and above. In the GCC, $575/mt CFR offers ex-Russia were voiced in Saudi Arabia with no interest from the local mill in a purchase. In the UAE and Oman, the estimated delivered level of offers is at around $600/mt CFR which is in line with ex-Iran offers for shorter lead times and less risks.