Global View on Billet: Pessimism returns as most buyers fail to support previous gains

After last week’s increases voiced by most major billet sellers in the global market, pessimism has returned and prices have posted slight declines. Sellers have failed to hike prices further or even maintain them in most markets as there has been almost no demand and the sentiment in the scrap and rebar segments have worsened. Some price increases have been seen only for ex-Iran billets, as suppliers managed to sell sizable volumes at lower levels last week and they have been targeting some hikes now, which have been successful mainly because prices from Iranian sellers are already among the lowest in the international market.

The Turkish billet market has been rather silent this week in terms of the domestic segment, taking into account insufficient rebar demand and the financial turmoil seen in the country. In the import market, only a few suppliers are there to sell and so billet pricing has been uneven and quite dependent on cargo size. Two 3,000 mt sales were closed by a trader at $577-579/mt CFR, which is considered to be a high level. However, the deals are explained by the lack of the small-cargo offers in the market and the relatively strong necessity of some buyers to restock. In addition, a 30,000 mt cargo was rumoured to have been sold at $540/mt CFR by a large mill, but the information has not been fully confirmed. Domestic billet prices in Turkey have decreased by $10/mt over the past week to $590-600/mt ex-works, while for exports Turkey may accept $580-590/mt FOB.

Though there have been a critically low number of offers from Russian suppliers this week and most official targeted levels have been much higher, the tradable price has moved down, reflecting the weakening buying sentiment and the expected softening of scrap prices. The competitive offers (which are far below $600/mt CFR Turkey) have been coming only for ex-Donbass billet, from one large Russian mill and a few traders. Russian mills have faced problems with scrap purchases, having no money, while at the current export prices for many of them the costs are below the breakeven line. So, some Russian mills have turned fully to local billet sales and are not offering to the export market. The reference FOB price has been settled at $10/mt lower this week at $515-520/mt FOB, based on deals reported done last week, fresh confirmed deals and the current tradable levels.

In contrast, the efforts of some Iranian billet suppliers to get higher prices in tenders have continued to yield certain results. However, some traders consider that sentiments have remained too “fragile” to expect any sustainability of the upward trend. A sale of a 20,000-30,000 mt cargo of ex-Iran steel billet was done at $456/mt FOB. The price is $16/mt higher than the levels in widespread transactions last week. As suppliers sold sizable volumes last week at $440/mt FOB, they have been more bullish this week, while apart from mills, traders have also been voicing higher levels by the end of the week.

As a result, the most recent ex-Iran offers for billet have settled in the GCC at a minimum of $530/mt CFR, while some buyers have been receiving $540/mt CFR offers. The previous level was at $475-480/mt CFR in offers and deals. Specifically, an Oman-based steel producer booked 50,000 mt of Iranian billets earlier in August at $475/mt CFR. According to sources, there have been new orders from Oman at up to $500/mt CFR in bids, but Iranian sellers did not accept this level. In return, in the domestic GCC billet market ex-Oman offers are estimated at $550-560/mt CPT to the UAE.

Most major mills have been attempting to further push up billet prices in Southeast Asia this week, and, even though at least one deal has been signed at a higher level, in general these attempts have failed. A major Indonesian mill has managed to close a deal for a minimum of 10,000 mt of billet at $550/mt CFR Manila for prompt shipment. This has been the highest level fixed in a deal lately, taking into account that the tradable level was $535-545/mt CFR last week. But such a high level is connected with the prompt shipment mainly. Early this week, offers from the major ex-ASEAN producers for EAF/BOF billets increased to $550-560/mt CFR and some even to $565/mt CFR, up by at least $10/mt from last week. But most customers said that the recent increase in offers is groundless. Another sign of the weak market conditions is the fact that traders have resumed offering in short positions. In particular, there have been reports about at least two small deals at $530/mt CFR for 3SP of open origin from traders to the Philippines. According to some sources, bids from customers in the Philippines are at $520-530/mt CFR for 3SP material, despite higher offers from mills.

The local Chinese market has been relatively stable in the first half of the week and import prices have been fluctuating near last week’s range of $505-513/mt CFR, but after the fall in futures prices by the end of the week, both local and import prices have slipped. Local prices have lost approximately $10/mt, and the tradable level has been assessed at $500-510/mt CFR on Friday. A deal for 40,000 mt of ex-Vietnam IF billet was done at $492/mt FOB last week with the sales destination said to be China. One source said that the freight for such a big volume, and as the shipment date is very close, is expected to be $15/mt or even below, resulting in the CFR price translating to $507/mt at the highest. But for now, even this level is assessed as high for Chinese customers, as they have withdrawn from the import market for now.

Ex-India tradable billet prices have been maintained at $470-480/mt FOB, after the decline seen last week. At least one government mill was heard to have put out a spot sale offer for 30,000 mt with the minimum target price of $500/mt FOB, but no trade was confirmed in the market. The sources said that most sellers - local private mills - were holding back deals at current low prices, expecting a strong September rebound in Asia, but resistance in the market has been evident from buyers rejecting offers close to the $500/mt FOB mark. The major focus of Indian billet suppliers has been on the local market recently.