Global View on Billet: Downtrend resumes amid bearishness in China, scrap and general outlook

Prices for billet in the international market have resumed their downward trend this week as the bearishness in the Asian market has been deepening given the weakness of the mood in China. Also, in other markets the latest decline in scrap prices has impacted demand for billet and the outlook at least for the short term remains bearish.

Billet sales in Southeast Asia have revived in early January following the price declines of around $15/mt triggered by the weak fundamentals in China. Most of the deals have been for Chinese origin billets done by traders in short positions. ASEAN mills have had to cut prices as well, but they are still less competitive, at least in the Asian region. A sale of 15,000 mt of ex-China 5SP billet was done at $450/mt CFR Manila for February shipment early this week, while in late December most offers for 5SP were at $460-465/mt CFR. Moreover, according to market sources, two more deals, also for 5SP Chinese billet, have been done just recently at $445/mt CFR to the Philippines and Indonesia. There have been no reports about sales of 3SP billet lately, with offers at $445/mt CFR for this grade. Thai buyers are looking for $435-440/mt CFR. Also, a contract for 4SP 130 mm billet has been signed with a Thai buyer for open origin billet for February-March shipment at $453/mt CFR. The price was high due to the size and also the manganese content of the material, which was not to exceed 0.6 percent.

Apart from Chinese billet, Russian origin billet can also be competitive in the Asian region. Though Russian sellers have not been active recently due to the holidays, at least one deal was rumored to Thailand by the leading Far East Russian mill at $430/mt CFR, which is $5/mt below its previous sales level to Taiwan and $10/mt below the deal done to Thailand in late December.

In the Chinese billet export market, the absence of further stimulus measures, the declines in futures prices, poor demand during the winter and the expected slow restocking ahead of the Chinese New Year holiday have all contributed to the decreases. The SteelOrbis reference price for ex-China billet stands at $425-435/mt FOB for February shipment, with the midpoint at $430/mt FOB, but by Friday a number of traders have already started negotiations at $420/mt FOB, which can be achieved if there is a firm bid, according to sources. One deal was rumored at $430/mt FOB from China, but signed late last week. Also, with talk about the new US president about to impose additional tariffs on China, the local currency has depreciated. Though the middle exchange rate announced by the PBOC has been rather stable, the spot market exchange rate has moved to above $1 = RMB 7.33 since January 7, versus $1 = RMB 7.29 in late December and the previous lowest rate of $1 = RMB 7.25 on December 10. The depreciation of the Chinese currency has provided some support for exporters, who have had to cut prices.

The leading Indonesian mill reduced its billet price to $435/mt FOB early this week, from the previous offer at $437/mt FOB, and a deal has been rumored at $430/mt FOB for March shipment. This has been widely discussed in the market, but the producer has denied it. “Dexin’s $430/mt FOB is too high for Asia. Traders can take positions from ASEAN mills for other markets only,” an Asian source said. Also, it is heard that Dexin has sold slab at $435/mt FOB for February shipment. A major Malaysian mill has been offering at $450/mt FOB and the tradable level for Malaysian origin has been assessed by traders at $445/mt FOB already.

In Turkey, local integrated steel producer Kardemir has sold up to 60,000 mt of billet this week at $490/mt and $510/mt ex-works for S235JR and B420 grades, respectively, which is $10-15/mt below its previous prices back in December. In the Iskenderun region, the billet price stands at $510-515/mt ex-works, sources report, down from around $525/mt ex-works before the holiday. Kardemir’s domestic sales levels have put additional pressure on import billet pricing, causing buyers’ price ideas to drop by around $10/mt, particularly for ex-Black Sea billet. In fact, ex-Russia billet was sold before the holiday at around $460/mt CFR, with suppliers’ targets subsequently reaching $465-470/mt CFR. However, it now seems that Turkish buyers would seek prices closer to $450/mt CFR. The SteelOrbis daily reference price for ex-Russia billet has slid by $5-10/mt over the past week to $435/mt FOB Black Sea.

As for Asia, Turkey has been receiving a handful of offers but no solid negotiations have been reported. The ex-Indonesia billet price has softened to $467-470/mt CFR from $470-475/mt CFR before the holiday, while China has been priced at $465/mt CFR by the end of the current week. Ex-Malaysia billet has been offered for shipment in the first half of February at $480/mt CFR, with the potential to drop to $470-475/mt CFR, but no transactions have been reported.

The Iranian billet market has been quiet this week and no fresh tender has been reported, while the workable level is estimated at around $435-445/mt FOB depending on the mill, the volume and the shipment time. However, these levels only seem to be acceptable to buyers in the Middle East, while for Asia prices would have to be lower by around $20-25/mt. Sources have been reporting that there are offers from ports for ready cargoes of 5,000 mt of EAF origin billet at $435/mt FOB, while the same tonnage of IF billet has been priced at $420-425/mt FOB Bandar Abbas. In addition, according to market players, a small sale has been done to Afghanistan recently at $385/mt FCA.

Indian large government-run mills have continued to be absent from exports in recent months, but some private mills which have attempted to test the market have been keeping offers stable at $480-490/mt FOB, but were rejected with bids reported to be at least $50/mt lower and considered by the sellers to be not serious. The reference price for Indian billet has remained at $460/mt FOB, considered to be the lowest possible level to be achieved from some seller needing to push volumes. Local billet trade prices have lost ground, but some traders and producers say this is a correction after prices had been up an upward trend over consecutive weeks.