Global View on Billet: Market characterized by sliding prices triggered by China and poor demand

A downtrend has resumed in the global billet market this week with the weakness seen in China, following decreases in futures prices and the depreciation of the domestic currency. Most large billet exporters have had to follow the trend if they need to sell. At the same time, overall trading has been rather limited with only rare deals done for Russian or Asian materials at discounts.

The ex-China billet reference price has settled at $440-450/mt FOB on Friday, down by $2.5/mt from early this week and down $10/mt compared to last week. The decline in billet export prices from China has resumed as falling futures prices have been seen since December 18, and they have reflected weak local demand with no further supportive measures from the authorities. Moreover, the more rapid decline in raw material prices, iron ore in particular, has resulted in lower costs and the greater flexibility of Chinese steel exporters. Also, the depreciation of the Chinese currency has added to the export price declines. On December 20, the exchange rate was at $1 = RMB 7.1901, versus $1 = RMB 7.1876 on December 13.

ASEAN mills cut billet offers in the middle of this week, following the recent declines in Chinese futures and spot prices. The leading Indonesian mill announced its offers for billet and slabs for February shipment at $445/mt FOB on December 19, down by $5-10/mt from the previous levels. There has been a lack of deals from Indonesia and the producer still has more than half of its February shipment allocation to sell. Ex-Malaysia billet offers have also been corrected down indicatively amid weak sales over the past weeks. In particular, the current FOB level is assessed at $450-455/mt. This has been reflected in offers to Turkey with some of them already being heard at $485/mt CFR.

Import billet offers from traders to the Philippines have been mainly at $465-468/mt CFR for both Chinese and ASEAN 5SP billets, down from $470-480/mt CFR late last week. Moreover, an offer from Japan for 5SP EAF billet has been heard at $462/mt CFR, being among the lowest at the moment, with buyers targeting $460/mt CFR. In Indonesia, buyers have received offers for 3SP Chinese billets at $460/mt CFR and for 5SP material at $465/mt CFR, but if there are bids they are not above $450-455/mt CFR.

Even considering the recent decline in Asian billet prices, Russian origin materials have remained the cheapest and sellers have been actively trying to expand sales. In particular, there has been talk about 35,000-40,000 mt of ex-Russia billet sold to Thailand at slightly below $440/mt CFR. Usually, Russian billet in Asia is concentrated in Taiwan and only rare deals are seen in the Philippines, so the sale to Thailand signals about a widening geography for sanctioned Russian billet.

In the Turkish domestic market, billet offers have settled at $515-530/mt ex-works depending on the region, with the higher end valid for Iskenderun-based buyers. Supply is said to be on the low side currently, taking into account climbing scrap prices, making some sellers unwilling to trade larger volumes. Import billet offers from China have decreased by $10/mt to $480-485/mt CFR for January-February shipment, while Indonesia is offering at $490/mt CFR. Ex-Malaysia cargoes were on offer to Turkey at $490-492/mt CFR earlier this week, but later some of the sellers have been testing as low as $485/mt CFR, though with no success. Currently, Turkey prefers to restock with import scrap or with billet with shorter lead times, i.e., from the Black Sea. This week, Ukraine has been offering at $500-510/mt CFR to Turkey, most probably having a limited volume.

Ex-Russia prices in Turkey’s import billet market have been somewhat vague this week, with some rumours about a sizeable sale first revealed at $470/mt CFR, while some sources reported there were a couple of transactions from a big supplier at $462-463/mt CFR. By the end of the week, one more transaction has been reported to a large Turkish buyer at slightly below $460/mt CFR. Bids for smaller lots have also improved in Turkey and some sellers reported they see some readiness to book for shipment at closer dates at $465/mt CFR, In Egypt, Russian billet was available this week at $490-500/mt CFR for material with high manganese content. The SteelOrbis daily reference price for ex-Russia billet has increased by $1.5/mt on average over the past week to $441-447/mt FOB.

This week, two Iranian suppliers have opened export tenders for steel billet after a period of relative absence from the overseas markets. In particular, South Kaveh Steel Company (SKSCO) is offering 10,000-30,000 mt billet for end-of-December or early January shipment with a deadline of December 21. In addition, Chadormalu Mining and Industrial Company has announced a tender for a 30,000 mt billet cargo for delivery in mid-February and with a deadline of December 24. The workable price levels for ex-Iran billet are estimated at around $450/mt FOB, although no fresh deals have been reported for several weeks now, at least for large tonnages from the first-tier mills. Sources believe it will be hard for the mills to go far below the mentioned level, given the persisting issues with electricity and natural gas supply, which undermine producers’ cost efficiency.

While ex-India indicative billet offer prices have been kept changed at $480-490/mt FOB, bids received have been lower in the range of $450-460/mt FOB in most Asian regions and the slight hardening of ex-China prices has had no impact on workable prices, resulting in almost inactive trade. The local Indian market for semis has showed some improvement in demand and prices with secondary mills increasing offtake of semis from integrated mills. So, the Indian export reference price stands at $460/mt FOB this week, versus $450-460/mt FOB last week.