Global View on Billet: Market finally posts gradual improvement, but for how long?

Prices in the global billet market have posted gradual increases this week, after weeks of declines and the stabilization seen late last month. But since trading is still rather weak and there is currently the seasonal slowdown of construction steel demand in July and August, market sources doubt the trend can be sustainable.

The Chinese billet reference price has increased slightly to $425-430/mt FOB, up by $2.5/mt over the past week as prices are supported by rising futures. The Central Financial Committee (CFCC) of China held a meeting on July 1, stating that it will “in accordance with the law and regulations, govern the enterprises low-priced and unorganized competition, guide enterprises to improve product quality, and promote the orderly withdrawal of backward production capacity”. This news has supported the market mood since the middle of the week. Some offers for billets from China have already been voiced at $435/mt FOB on Friday, but trading has almost stopped as even $425/mt FOB is said to be represented in very rare price ideas from buyers. Another reason for the better mood in China has been the announcement of sintering and steel production cuts by 30 percent in Tangshan on July 4-15.

Rumors about possible restrictions on billet exports from China emerged on June 30, after a warning made by the China Iron and Steel Association (CISA). However, as there are no concrete moves so far and a part of market sources are skeptical that the measure will be tough, there has been a limited effect on the market, at least for now.

The leading Indonesian mill has increased its billet offers for October shipment to $435/mt FOB, up by $5/mt from the level seen in the middle of the week and up $10/mt from Monday. Market sources said that there have been no new deals as “that’s too high, today’s real transactable prices should still be at $430-432/mt FOB”, as one international trader said. Two other large traders said that they may only see demand at not above $425/mt FOB.

The upward mood has persisted in Southeast Asia’s import market this week, following rises in the Chinese market. Most offers for 5SP billet in Southeast Asia have been reported at $450-455/mt CFR Manila late this week, with most offers at the higher end of the range. The prices are up $10/mt from previous sales levels, but no one is buying at the higher level. In Thailand and Indonesia, offers have been limited and mainly at $445/mt CFR for August-September shipment Chinese 3SP billet.

Turkish billet buyers continue to choose domestic billet or foreign billet with shorter lead times - from the Black Sea region. Locally, Kardemir has traded close to 50,000 mt of billet at $485/mt ex-works for S235JR and $495/mt ex-works for B420. In the Iskenderun region, the billet price range is at $495-497/mt ex-works, with no deals reported, while an Izmir region-based mill is offering at $505/mt ex-works.

In the import segment in Turkey, Asian material is only available for deliveries in October and later, while its prices have increased over the past week. In particular, Chinese billet is now priced at $465/mt CFR and slightly higher, up from $452-455/mt CFR seen last week. Ex-Indonesia billet offers for October shipments remain indicative due to the long lead time, with the most recent price settled at $435/mt FOB, up $5/mt over the past week, which translates to around $470/mt CFR. In addition, an ex-Malaysian 150 mm billet cargo for end-of-August shipment is offered at $490/mt CFR, while another cargo for similar material is reported to be on the water and available at $480-485/mt CFR. In addition, two deals were closed for ex-Ukraine material at $485-492/mt CFR for end-of-July and mid-August shipment, for a total tonnage of 30,000 mt.

Russian billet has also been of interest to Turkish buyers due to the availability of cargoes for prompt shipment. According to sources, a cargo from Donbass has been sold at $455-456/mt CFR, up $5-10/mt from the previous deals, though the information was not fully confirmed by the time of publication. Another deal from Russia has also been rumored at $455/mt CFR, which translates to around $435/mt FOB. As a result, the SteelOrbis reference price for ex-Russia billet has settled at $435/mt FOB, versus $425-433/mt FOB late last week.

Sources said that, while ex-India billet prices are stable at $415-425/mt FOB and local mills were claiming a bottom has been reached, buyers across key destinations have been staying away from deals perceiving that the stability will be short-lived. Meanwhile, in the local market, billet trade prices have showed a mixed trend amid very weak trading activity. Billet trade prices are up INR 300/mt ($4/mt) to INR 39,600/mt ($462/mt) ex-Mumbai, but have lost INR 150/mt ($2/mt) to INR 36,900/mt ($431/mt) ex-Raipur in the central region.