Global View on Billet: Market weakens, but it is not a sign for visible recession

- The sentiment in the international billet market has worsened slightly this week and most major exporters have had to cut prices. And though the price decline has been relatively small and demand has slowed down, but has continued, many market sources have been expecting more clarity from early October.

- The fears of a default by China’s second largest real estate developer Evergrande Group have led to big concerns over steel consumption in China.

- Nevertheless, Chinese import billet bids have recovered in the first days after the holidays and a deal for ex-Indonesia billet has been done at $710/mt CFR, while the highest bids before the holidays were at $705/mt CFR. Negotiations have been at $715/mt CFR with more offers increasing to $720-725/mt CFR on Thursday.

- But this improvement has been short lived as on Friday, the sharp fall in rebar futures and $9/mt decline in local billet prices have pushed down bids from China again – to $695-705/mt CFR.

- In SE Asian import market the prices have also been lower this week with the tradable level hardly above $700/mt CFR. Even when China returned from holidays with more optimism, sentiment in this region has been weak due to continued low rebar demand and prices and impact from Covid-19 restrictions.

- CIS billet exporters have not been very active this week with no new deals to China, but one deal for 20,000 mt of billet was done to Latin America at $600/mt FOB, at least $5/mt below the level seen in a contract to this destination earlier in September. Following the sales to China and Latin America, and also taking into account expected reduction in steel production in Ukraine due to maintenances in October and raw material related cost issues, allocation of billet from the CIS has not been high recently. This prevented FOB Black Sea prices from bigger drop. 

- Iranian mills have managed to sell three lots over the past week with all targeted to China. Ex-Iran steel billet prices have remained unchanged during the past week, at $635-640/mt FOB, but with higher end of the range having been already fixed in deals.

- The billet exporters from Gulf have been also well-placed after the latest deals to China over the past ten days, so this supported the price level in the region in general and prevented mills to give lower rebar prices to Asian customers as well.

- A tender, held by Indian major mill RINL, for 30,000 mt of 150 mm billet, has been closed recently owing to revived demand from China after the holiday. The highest bid from one Chinese trading company has been heard at $629.5/mt FOB, this price level has been assessed at relatively high for the current market conditions. By the end of the week, the tradable level for ex-India billet has come back to $605-610/mt FOB as the highest.

- Billet import talks remain scarce in Turkey, as the buyers’ bids are far away from the sellers’ expectations. Some of the re-rollers have decreased their bids to below $600/mt CFR, which is not acceptable for those to sell small lots to Turkey. Those buyers, who are ready to pay higher prices for the larger lots, still have trouble in finding the offers, as the CIS-based mills are targeting to sell elsewhere at higher FOB levels.

-Fears of further price decrease have been there in the international market this week. But most sources have not been very pessimistic as for now. First of all, China is expected to keep its crude steel production cuts by the end of the year, so overall appetite for billet will be strong. In addition, there have been limited allocation from a number of sellers for November shipment.

- China’s National Development and Reform Commission (NDRC) issued the Dual Control System of Total Energy Consumption and Energy Intensity, pointing towards further capacity restrictions. The number of provinces, such as Qinghai, Ningxia, Guangxi, Guangdong, Fujian, Yunnan, Jiangsu and Hubei, were added to a list of the highest level warning areas in terms of total energy consumption. This means that the control on crude steel production will intensify by the end of the year, even though the restrictions in such provinces like Jiangsu are already high – to limit utilization rates to 30-50 percent by the end of September.