Global View on Billet: Mood worsens further as Asia still negative, scrap falling

- The situation in the global billet market has failed to improve this week as scrap prices have fallen deeper, overall demand has remained weak, and China has come back from the holiday in the same bearish mood. In such conditions, prices for billet have remained under pressure and new lows are expected to be seen next week.

- Sentiment in Southeast Asia’s import billet market has remained bearish this week even though aggressive position offers from traders have been absent due to the holiday in China and the despite slightly better expectations for the market development in May. An offer for 130 mm 5SP billet to the Philippines from a large Russian mill has been reported at $525/mt CFR Manila this week, while one deal from another Russian mill was done at $530/mt CFR to the Philippines last week. The lowest offer of $510/mt CFR has been available for ex-Thailand IF billet. Though most sources believe this level is too low for the current market, amid the falling scrap prices for June shipment billet prices may drop to this level in deals soon.

- On Thursday, May 4, the first working day after the Labor Day holiday, local steel prices and futures prices in China have posted a further decline, indicating the continuing bearish sentiment in the market. Ex-China 3SP billet offer prices have remained at $520-530/mt FOB for most of this week, while slipping a little to $510-520/mt FOB on Friday, while Chinese traders have resumed offering open origin billets in positions at $525-535/mt CFR to Southeast Asia, also stable over the past week, as they expect prices to go down further. Ex-ASEAN mills have been voicing offers at $530-540/mt FOB this week, slightly below $540/mt FOB reported last week. But, in fact, prices have not changed much, according to sources, as even last week mills were ready for discounts. In Taiwan, the last deal for ex-Russia 3SP billet was done at $522/mt CFR last week, slightly below offers reported at $525-530/mt CFR.

- Iranian steel billet exporters continue struggling to avoid sharp price drops in their sales and, while the major suppliers have managed to close some deals at relatively high levels, the smaller and less frequently active sellers have provided larger discounts. Recently, a 30,000 mt ex-Iran billet cargo has been sold at $492/mt FOB base, while another supplier has traded a similar lot at $475-480/mt FOB. In addition, there has been a 20,000 mt sale via the Iran Mercantile Exchange (IME) at around $485/mt FOB. A fresh tender for 30,000 mt of billet has been floated, with a deadline on May 9. Given the weak market sentiment, the workable price is expected at $465-475/mt FOB and this in the case of further sales to the GCC region.

- Indian billet exporters led by government-run mills have returned with offers attempting to revive trade through aggressive pricing and expectations of improved market activity after the May Day holiday in China and other Asian regions. One government mill floated a tender-based export offer of 30,000 mt, while another state-run mill announced a spot sale offer of 20,000 mt and, even though no deals have been concluded to date, the sellers are expected to accept prices in the range of $500-520/mt FOB, compared to $520-530/mt FOB a week ago. Indian sellers are also likely to accept bids even below $500/mt FOB to revive buyers’ interest as acceptable valuations are currently ranging at around $520-530/mt on CFR basis for most Asian destinations.

In Turkey, the billet market has remained dull in terms of business activity. The large buyers remain out of the market, having issues with their import licenses amid slow longs export sales and also trying to evaluate their own billet production costs amid falling scrap prices. The smaller customers, i.e., re-rollers, have not been so active on the import side following last week’s bookings at $565-578/mt CFR for around 15,000 mt in total. Some of them, however, have preferred to restock at $585-590/mt ex-works Iskenderun, down $15-20/mt over the past week. In the import segment, both offers and bids have been considered as “largely random” this week, are there is no active demand and negotiation. Turkish buyers and some traders believe that workable prices for ex-Russia and ex-Donbass billet are at around $540-550/mt CFR maximum. Some predict the bottom for these origins at $530/mt CFR and feel it is near, amid the increased number of speculations in the market. Particularly, there has been talk about an ex-Iran 30,000 mt sale at $490/mt CFR and a deal from Russia at $530/mt CFR. Both these rumors have been denied by many players in the market, who have evaluated the ex-Iran price level specifically as being “unnecessarily low”.

While the Turkish market has been in a lull and downward expectations prevail, the sentiment in the ex-Russia export billet segment has also been rather negative. Over the past week, the SteelOrbis reference price for billet of this origin has decreased by $10/mt to $530-540/mt FOB and may soften further in the case of additional price decreases seen in the import segment in Turkey. The rare bids from customers have been reported at $540/mt CFR Turkey on average, but they are not yet being taken seriously. In the Far East, the downtrend in the billet segment has also continued and the offers from Russia for billet to be shipped from Far Eastern ports are at $525/mt CFR for 130mm 5SP material. Talk about a previous booking at $530/mt CFR for a decent lot has been heard, but the sale is largely believed to be closed last week.