Global View on Billet: Markets lack confidence for an increase, but bearish moods also diminish

This week has been characterized by limited price fluctuations in the major billet markets as the uptrend moves, pushed by a number of sellers since last week, have either not been supported by buyers or have been fixed only in occasional deals. Though negatives in Asia have not fully faded away, market sources have been also less confident that prices may go down much further.

Billet sales have been rather occasional in Turkey this week and the number of serious negotiations has been modest since both buyers and sellers have been trying to evaluate the impacts of the financial situation, increased freights, unclear scrap trends and prospects of the finished steel sales. The import offers have overall remained at the past week’s level of $480-500/mt CFR for ex-Russia and Donbass billet and some rare bids have been reported within the range. However, the increased freights in the Black and Azov seas have put additional pressure on the suppliers in terms of keeping their margins acceptable. As a result, there has been only one deal reported for 5,000 mt at $515/mt CFR Iskenderun, but it is considered as an exception since it is for the immediate shipment. In the local market, the general price range for Turkish billet decreased from $550-555/mt ex-works targets in some regions to $530-545/mt ex-works, but again no decent activity has been seen.

The reference price for ex-Russia billet has been at $450-460/mt FOB this week, as even some higher CFR prices have been discussed in the Turkish market since last week, the FOB level has been impacted by still rising freight rates. For instance, for 10,000-15,000 mt lots of billet, the freight from Novorossiysk to the Marmara region will be $25/mt at the lowest, while to Iskenderun the freight can be up to $38/mt. For smaller lots of about 3,000 mt from Rostov port, freight has hit and already exceeded $50/mt since, apart from the start of the grain season, the higher risks connected with the endangered Crimea bridge have added to the situation. As for prompt shipments for August, freights are still lower with $18-28/mt rates for 5,000 mt lots.

Though the recent steel production cuts announced in the major provinces in China up to the end of this year were expected to provide some support to the Asian billet market, this has failed to happen as supply still outweighs demand. Ex-Indonesia billet offers have officially declined to $500-505/mt FOB, down by $5/mt from the previous level. A deal for at least 10,000 mt of ex-Indonesia billet to a trader was done at a few dollars below $500/mt FOB late last week, which was also slightly down from the previous sales to traders reported at $501-505/mt FOB last week.

However, the optimism may increase in the near future in the Asian market if the situation in China will gradually improve, supported by demand, as expected ahead of the construction season. Ex-China 3SP billet prices have been at $500-510/mt FOB with the average price $10/mt above last week. A deal for ex-China billet to East Asia, Taiwan in particular, has been done at $508/mt CFR, which is slightly below the previous offers from Russia and Asia at $510-515/mt CFR in the middle of the month, but slightly higher than bids reported at $505/mt CFR max last week. This deal price translates to around $490-493/mt FOB China, however, by the end of the week most offers for ex-China 3SP billet have not been below $500-510/mt FOB.

Prices for imported billet in Southeast Asia have failed to move either direction as even though negatives have prevailed in the market and the steel production cuts in China have been not enough to provide support to the prices, the resistance between suppliers and buyers has been strong. Most offers for 5SP billet of ex-China and ex-ASEAN origins from traders have been at around $518/mt CFR with no deals reported this week and one contract for ex-ASEAN material came to light signed at near $520/mt CFR last week at “restocking need” basis. Bids have been reported at $510/mt CFR and below this week.

Iranian billet trade has been silent for a while, taking into account the recent issue with the abolishment of the increase in the export taxes for steel and raw materials. However, a few new contracts have been signed at higher levels. A recent sale for 30,000 mt of billet has been closed by Esfahan Steel Company (ESCO) at $475/mt FOB, $10/mt up from the previous transaction of early August. The cargo is said to be for 3sp modified billet grade, which might imply some price extras. In addition, there has been a talk about around 10,000 mt deal for ex-Iran billet origin at $463-465/mt FOB to Oman, while the latest offers to the UAE have been reported at around $485-490/mt CFR, $5/mt down over fortnight. The freight rate to the GCC countries from Iranian ports is estimated at around $20/mt.

Ex-India billet offers have been maintained at $505-520/mt FOB amid ongoing inactive market conditions, with mills being almost absent from exports and given rising local merchant demand following the strong performance in construction grade steel products by secondary mills. However, as the tradable level in Asia has moved down and as bids started to come at lower levels, the SteelOrbis reference price has decreased from $505-520/mt FOB to $500-510/mt FOB. The mood among major exporters has worsened amid reports that the highest bid received by a government seller at a recently held tender was in the range of $480-490/mt FOB, below expectations of $510/mt FOB minimum and the seller did not confirm any sales contract.