Global View on Billet: Optimism strengthens this week, though negatives still exist in Asia

The global billet market has improved this week, strongly supported by the uptrend in the scrap segment. However, the prices rises have not been seen in all major markets. While in Turkey, the market has been better both in terms of sales volumes and prices, in Asia the situation has not been that bright. The major positive factor in the Asian market has been the recent announcements of steel production cuts in the second half, which may support prices in the coming weeks. 

The positive trend in the Turkish billet market has accelerated this week with the support of higher scrap prices and the uptrend in the local rebar segment. Although local end-user demand for longs is still far from being at the desired levels and financial issues continue to weigh heavily on trade, some restocking has been seen for both longs and billet. Turkey’s Kardemir has reopened its domestic billet sales but has chosen to keep offer prices relatively stable since the previous round of sales. As the market has strengthened somewhat over the past two weeks, the mill has managed to close the sales with sizeable volumes quite easily. The supplier’s price for 150 mm x 150 mm B420 grade billet has been announced at $510/mt and $520/mt ex-works. According to sources, the producer has traded up to 105,000 mt of billet locally. The supplier’s attractive billet offer triggered sizeable demand in the end and helped diminish available stocks. 

Most offers for ex-Russia and ex-Donbass billet have soared to $480-500/mt CFR for September shipment by the end of this week, up by $10-20/mt from the tradable level early this week and by as much as $22.5/mt on average over the week. The lower end of the range at $480-490/mt CFR represents the targets for ex-Donbass billet, while a number of Russian mills, offering for both prompt and September shipment, have been asking $500/mt CFR and above. However, no deals have been reported at higher levels just yet. The tradable level for ex-Russia billet to Turkey is translating to $455-460/mt FOB Black Sea, stable from early this week and up by $15/mt since last week. The FOB level has not increased much since early this week as freight from Black Sea to Turkey have soared amid the start of the grain season and higher risks. Rising billet offers have pushed Turkish buyers to be more active in negotiations. As a result, a cargo of less than 15,000 mt of ex-Ukraine billet has been traded to Turkey at $500/mt CFR. The price represents the tradable level for “clean origin”, while buyers are reluctant to accept even close to this for Russian material. After Kardemir sales at relatively low level of $510-520/mt CFR, some producers in Iskenderun and Marmara have voiced new offers at $550/mt ex-works.

The situation in the Asian billet market has remained negative as ex-China quotations have kept falling in the earlier part of the week. The ex-China reference price for 3SP billet has settled at $490-500/mt FOB, down by $7.5/mt from last week. The weak demand in the local market in China is the main reason behind the further fall, but the news that mills were asked to cut steel production in the second half and the PBOC’s decision to cut the key policy rates for the second time in three months may lead to the downtrend halting for some time. And market sources do not exclude some cautious rebound in China, connected with these news. The crude steel production restrictions are anticipated to be implemented at more mills, not only in Hebei-the key steelmaking hub in China. For instance, mills in Jiangsu province have been required to cut utilization rates by 20-30 percent compared to first half, while in Shandong province, steelmakers will have to cut their steel outputs by around 10-15 percent since September from the first half levels. 

The leading Indonesian mill has managed to sell sizable volumes of billets to traders who needed to cover their previous positions, with the main share for the Asian market. The Indonesia mill’s sales to traders have been mainly at $501-505/mt FOB since last week, with around 30,000-40,000 mt sold, according to different sources. In total, the producer has sold 130,000-150,000 mt of steel products abroad over the past two weeks. Official offers from Indonesian mill were still at $505-510/mt FOB for September shipment billets, but most market sources assess the latest deal prices as slightly lower than the previous bookings at $508-510/mt FOB, but “in line with the market.”

Offers for 5SP billet in the Philippines have been at $518-522/mt CFR, almost stable over the past week and some sources have reported that the lowest possible for this grade is $515/mt CFR from some Chinese traders. The main ex-Asia offers for 3SP billet are at $510/mt CFR. A Russian supplier, shipping from Far East ports, has managed to sell more volumes. Two deals for 25,000 mt for ex-Russia 100 mm billet were signed to the Philippines at $500/mt CFR and $510/mt CFR last week. The SteelOrbis reference price for 3SP and 5SP billet in the import market in Southeast Asia has remained at $510-520/mt CFR.

Ex-Iran square billet market has remained quiet this week with no fresh tenders being closed. The expected price to be relatively workable is at $440-450/mt FOB if it is later to be sold to Asian markets, or slightly higher if destined for the GCC. However, no movement has been seen, mainly considering the ongoing developments regarding the recently announced increase in the export taxes for steel and raw materials. Following the lobbying activities by the local producers, the Iranian authorities have carried out the court decision, ruling that the duties above 0.5 percent are illegal and should be levied. Such a decision has inspired the suppliers, but the implementation timing is still unknown. 

The negatives from China which have had an effect of contagion across Asia have forced ex-India billet trade to lapse into near inactivity, with both buyers and sellers being uncertain of the short-term trend. Though ex-India billet prices have been maintained at $505-520/mt FOB, market participants have claimed the range to be unworkable. Indian sellers will remain out of export sales at any price below the $500/mt FOB mark.  

* - deal prices