Global View on Billet: Prices decline due to weak demand, fall in scrap prices

The downtrend in the global billet market has resumed this week with declines seen in most major markets. In China and in Asia in general the price decreases have been due to weak demand, though prices have failed to decrease much given the continuing support from strong coke prices. In the MENA region, billet quotations have been under pressure from falling scrap prices in Turkey, as well as from more active low-priced offers from Iran.

The SteelOrbis reference price for ex-China 3SP billet stands at $465-470/mt FOB for August shipment, down by $5/mt over the past week. The steeper drop has been partially offset by the rise in local coke prices in China: mills have accepted the eighth round of coke price increases and the ninth round was proposed on Wednesday. There have been no strong negotiations for Chinese billet this week, but market sources believe that the next bookings will be at $460-465/mt FOB, versus a contract heard to have been done last week at $470/mt FOB. There have been no new negotiations in the GCC after a sale at $527/mt CFR to Saudi Arabia, and one Chinese exporter commented that the problem is not the price itself but shipment, since a lot of quantities have been booked and buyers are waiting for them to arrive. 

The Indonesian mill has cut its September offers for billet by $3/mt to $480/mt FOB, also reflecting the weakness in the market, even though the producer is not very eager to sell at present.

In the local Turkish billet market, weak scrap prices and insufficient rebar sales as well as sliding workable prices for long steel have been putting pressure on mills’ billet offers. In the Iskenderun region, billet price levels have stood at $540-545/mt ex-works, with a small lot booked at $543/mt ex-works for prompt delivery, while most buyers’ bids for larger volumes are closer to $530/mt ex-works. In the Izmir region, the billet offer level is assessed at $545-550/mt ex-works, which is not so workable versus local rebar price levels. Overall, taking into account that the current production cost for billet in Turkey is evaluated at around $550/mt, the mills do not feel they are in a position to provide large discounts. However, next week a further weakening is anticipated.

Import offers from China stand at $518-520/mt CFR, mainly with $515/mt CFR considered achievable, and no interest seen, sources report. Malaysia, Indonesia and Ukraine remain out of the Turkish market, reducing the overall allocation for potential buyers.

Instead, 20,000-30,000 mt bulk billet cargo offers from Iran have been reported in the market at $480/mt CFR for July shipments, with $5/mt discounts possible. According to some sources, a deal for a large volume has been closed at $500/mt CFR. However, most market sources evaluate the level as too high for the current market conditions, especially considering last week’s offers of around $480-485/mt CFR. Ex-Iran spot cargoes are on offer at $475/mt delivered (train and truck loads), many buyers report.

The latest Russian billet offers to Turkey have been reported at $500-505/mt CFR Izmir from a large mill, along with a few buyers reporting $495-497/mt CFR from smaller suppliers. However, bids have been voiced at $480-485/mt CFR, down from around $490/mt CFR a few days earlier. The SteelOrbis daily reference price for ex-Russia billet has moved down to $470-480/mt FOB, from $475-480/mt FOB seen earlier in the week.

In Southeast Asia’s import billet market, offers for ex-China 5SP have been reported at $495-497/mt CFR, down from $497-503/mt CFR last week. Several Chinese traders have Chinese 5SP billet positions in hand and are inviting bids at around $490/mt CFR. Most Chinese offers for 3SP billet have been heard at $485-490/mt CFR in Indonesia and Thailand, Iranian billets have been on offer at $480/mt CFR. 

After a brief pause, large Indian mills returned to the billet export market, pushing large-volume offers. Ex-India billet exporters are still targeting not below $470-475/mt FOB, but rare bids have been lower by $10/mt or more, belying expectations of improved realizations, as buyers are cautious since they expect a correction triggered by more sellers entering the market following the easing of geopolitical tensions in the Middle East. The aggressive offers on the export front are led by a government-run mill which floated a number of tenders for 60,000 mt of billet in total which should be closed this week. But, for one of the tenders, the mill has failed to receive any firm bid and it is likely to be cancelled “as it was on 100 percent advance payment basis, not by LC”. According to trade circles, the same government mill has received highest bids in its second tender this week at just $455-460/mt FOB, below expectations and no confirmation is yet available on whether a sales contract has been signed with the highest bidder.