Global View on Billet: Mood remains negative everywhere despite stable Chinese market

- Sentiments in the major billet markets globally have remained negative this week and, even though the pace of the price fall has slowed down after the plunge last week, most market sources believe that the low activity and pressure on prices will continue in the near future. Even though the Chinese market has been firm and such raw materials like iron ore, coal and coke have been on the rise, the scrap market is still weak, killing any improvement expectations for billet in July.

- The billet market situation has remained rather challenging for sellers in Turkey since buyers have further lowered their import bids. Rebar sales and prices are still weak while producers continue to put pressure on scrap pricing, aiming to reduce their costs. As a result, offers for ex-Russia and ex-Donbass cargoes have been reduced to $470-475/mt CFR, from $480-485/mt CFR in deals and $490/mt CFR in offers last week. Some sellers have reported bids at $460/mt CFR, claiming they are not ready to accept this price. Others, however, may be ready for $465-470/mt CFR if the customer is serious. So, the SteelOrbis reference price for ex-Russia billet has settled at $440-450/mt FOB Black Sea, down by $10/mt on the lower end and by $20/mt on the higher end since late last week. Sources are mainly quite pessimistic about the billet market in Turkey for the coming weeks and there are not many suppliers currently present in the market. In addition, another concern is the possible impact of Ukraine’s latest announcement that it could consider ships in the Black Sea and Azov Sea as military targets. Many believe it will result in increased freight rates in the area and problems with insurance companies, which in turn may take a toll on billet shipments, specifically to Turkey, among other products.

In the local market in Turkey, Kardemir has remained silent this week in terms of billet sales and the general level of prices has remained indicative and at $525-550/mt ex-works/CPT depending on the region.

- The mood in the Southeast Asian billet market has worsened this week as, even though the Chinese market has remained relatively stable, bids in the region have fallen again and buyers have managed to find lower prices from alternative suppliers when restocking since last week. 10,000 mt of ex-Malaysia IF billet have been traded to the Philippines at $503-505/mt CFR, while a small sale of ex-Indonesia 5SP 130 mm billet has been done at $515-518/mt CFR. This level has already been assessed as too high for customers with some of them having already dropped bids to $495-505/mt CFR in Southeast Asia.

- Moreover, there have been two deals for ex-Russia billet done to the Philippines after a long pause, and a number of market sources believe that there is a possibility that Russia will try to increase bookings to Asia. The one deal was for 26,000 mt of 125 mm billet from Russia’s Far East done at $510/mt CFR to the Philippines, while another contract for 100 mm billet from another Russian producer has been widely discussed at $500/mt CFR Manila. This deal has been done with a Chinese trader and payment is in RMB. As for now, there have still been no firm offers from the Black Sea to Asia, which is partly due to the limited demand for large volumes in Asia, long lead times and the increased risks in shipments from the Black Sea. However, the current FOB Black Sea prices fit the Asian market.

- This week, official offers from the main Indonesian mill have been at $505/mt FOB, stable over the past week. And late last week one deal was reported as having been done at $500/mt FOB. At the same time, ex-China billet offers have also remained stable compared to late last week - at $500-510/mt FOB, with the midpoint at $505/mt FOB. Most market sources believe that Chinese market prices are supported by higher raw material prices and expectations of stimulus measures for the property sector. But there has been no chance for price rises, taking into account the hot weather and the rainfalls in some parts of China and still relatively high levels of steel production.

- In Iran, there have been no confirmed billet export sales this week, partly taking into account the still slack pricing for semis globally. However, the key reason is the government’s decision to raise export taxes for several steel products and raw materials, which has created another obstacle for ex-Iran exports. Particularly, the duty for billet and slab has been settled at two percent from almost zero previously, and, although the rate is not critical, it is still holding back trade. In addition, during the summer period production in Iran traditionally declines due to electricity supply limitations. While no large billet tonnages have been reported as sold this week, there has been talk about a 10,000 mt sale, possibly done by a trader for Oman or the UAE, at $473/mt FOB. The latest tender by a mill, for 30,000 mt, was closed around 10-12 days ago at $483/mt FOB as SteelOrbis reported. Moreover, the $470-475/mt FOB level is not considered a market level, at least temporarily, while larger lots may be sold at even lower prices, given the low price levels in the main consuming destinations.

- Ex-India billet prices have showed little change over the past week with sentiments worsening and bids from buyers in the markets being below $500/mt FOB. Ex-India billet reference prices are stable at $500-510/mt FOB, which reflects the lowest offers from private mills and market sources’ assessments of the tradable levels. However, s government mill held an export tender for 30,000 mt of 150 mm prime concast billet and there was speculation in the market that it was closed at $522/mt FOB, so in line with the seller’s expectations. Nevetheless, this information has been actively denied by most market sources involved in export sales from India nowadays, as all of them believe there is no international market where this level could be accepted and this may just be a rumor to support the market mood.