Global View on Billet: Negative Asia, weak scrap weigh on billet market

Negative moods have returned in the global billet market after last week’s hopes for rebound. Though some of suppliers have been still waiting for at least a bit higher price, Asian reopening at negative note and lower scrap tags in Turkey have been impacting sentiments in the global billet market.

The bearish sentiments have been due to the resumption of the downtrend in the Chinese billet market after the long holiday, which is very unusual and signals oversupply in the market. The reference price for ex-China 3SP billet has come down by $5/mt on average to $480-500/mt FOB. One source said that official offers are at $490-500/mt FOB, but traders are ready to accept $480/mt FOB, seeing no demand at levels above that. Chinese origin billet has become the most competitive in Asia recently, though deals are still limited. Even though iron ore prices and steel futures prices have improved a little over the last two to three days, the outlook has not changed much and prices may stop falling only in the case of significant production cuts in China, market sources believe. 

ASEAN region-based mills were not very active early this week as they understood that they have to cut prices more to push volumes abroad. Ex-Indonesia 3SP billet offers declined slightly - by $5/mt from the pre-holiday level - to $500/mt FOB, according to a number of sources who received offers at the weekend. However, most market participants believe that the mill will have to cut prices more. The last deals for ex-Indonesia billet were rumored at $497-505/mt FOB to traders and for Indian buyers specifically. However, in the next sales, traders expect to achieve $490/mt FOB. 

In Southeast Asia’s import billet market, the lowest offers for 5SP billet have been reported for ex-Thailand IF material to the Philippines at $495-500/mt CFR, while last week they were at $505-510/mt CFR. Offers for ex-ASEAN BOF 5SP billet have remained at near $515-520/mt CFR, but the same grade of Chinese BOF billet has already been available at $510/mt CFR or a few dollars below this. Buyers in the Philippines were targeting $500/mt CFR for 5SP, while those from Indonesia and Thailand were targeting $490/mt CFR, versus 3SP offers from China at $505/mt CFR.  

The domestic market in Turkey has been fluctuating in terms of the billet price. Following the talks of offers at as high as $550-565/mt ex-works in the Iskenderun region and $540-545/mt CPT in the Marmara region, this week many market players have been reporting about a certain softening – to around $530-545/mt ex-works. Buyers would insist on the levels closer to $520-525/mt ex-works, which seem not much available, while the sellers prefer to hold back the offers, not willing to provide large discounts even though the scrap levels have softened. As a result, the number of local billet offers are not numerous. “With the [current] cost of production it cannot fall too much, scrap dropped by roughly $10/mt, costs up by up to $15/mt [due to energy],” a trader told SteelOrbis. Overall, market sources estimate the own billet production cost at $530-535/mt ex-works in Turkey. Billet price levels are expected to settle next week once the import scrap and billet trends and actual offer levels are to gain more clarity.

This week, the number of import offers from Russia and Donbas has been seriously limited this week due to the limited availability, buyers stepping back from the market due to scrap softening and overall market uncertainty. Over the week, the SteelOrbis reference price for ex-Black Sea billet has moved up by $5/mt from the lower end of the range to $475-490/mt FOB due to supply issues rather than due to buyers’ interest. Russian mills are mainly targeting $480-500/mt FOB levels, and the higher end is definitely not considered workable. In Turkey, the lowest offer has been reported at $505/mt CFR or around $475/mt FOB Black Sea. In Egypt, the tradable level for ex-Russia billet is at up to $540/mt CFR or around $490/mt FOB, but no new transactions have been reported. Aside from Russia, there have been almost no offers from Donbas-based suppliers, which have been reportedly experiencing some troubles with sourcing scrap.

Prices for ex-Iran square billet have remained relatively stable over the week with one sales reported in the market, and one fresh tender has been announced. According to sources, one of the Iranian mills has recently sold a cargo of 30,000 mt of billet at $476.5/mt FOB for end-November shipment. Another producer has recently announced a 20,000-50,000 mt billet tender with the validity till October 16. At the same time, the mill has also opened a tender for the same volume of steel slabs. Currently, traders are offering $475-480/mt FOB or $510-515/mt CFR for billet to Asia, which is not considered workable. The price levels for the GCC and other Middle East countries are at $480-490/mt FOB and are also of no interest for the buyers just yet.

Indian mills’ target billet export prices have remained above $510/mt FOB, with sellers uninterested in submitting offers at a time when acceptable prices among Asian buyers are down below the $500/mt FOB mark. A small number of bids was submitted in the latest export tender for 30,000 mt of 150 mm billet, none of which are reported to be higher than $480/mt FOB. At the same time, in the import billet market, after the previous sales at near $520-530/mt CFR for sizable lots of Asian origin billets, market sources said that buyers are insisting on around $510-515/mt CFR, with no new deals reported so far this week.