Global View on Billet: Prices ease in all major outlets, outlook bearish

- Prices for billets in all major outlets - from Asia to the Mediterranean - have fallen this week with demand mainly remaining scarce. In the Turkish market, which was mostly moving on a rising trend before the holidays, prices have also resumed their declines, following a negative scrap price correction. In Asia, no improvements are seen in terms of demand and traders are becoming even more aggressive as they believe the market will keep falling in the near future.

-  The downtrend in the import billet market in Southeast Asia has been gaining pace amid aggressive offers by traders going short, as they are sure that mills will cut prices more in the near future. At the same time, demand in most countries in the region has been critically low, putting pressure on sentiments. Short position offers from traders for ex-ASEAN (EAF or BOF) billet have been reported at $530-535/mt CFR to the Philippines this week, translating to $500-505/mt FOB, while ASEAN mills have been offering at higher levels, at $510-520/mt FOB or $545-550/mt CFR Manila. No deals have been done to end-users, but some transactions were under negotiations from mills to international traders at $500-505/mt FOB. 

- After a big drop in Chinese rebar futures prices late last week, they posted a rebound early this week, but this has provided little support for local spot prices and imports are expected to remain at a standstill in the near future due to buyers’ price ideas which are still below $500/mt CFR. The tradable import price has been at $480/mt CFR on average, stable from last week. But sources have pointed out that, while most bids were hardly above $450/mt CFR last Friday, after some improvement in futures prices customers may consider $480/mt CFR. At the same time, no offers at even closer to these levels have been reported. Offers for ex-Russia billet have not fallen below $500/mt CFR, while the lowest ex-ASEAN billet offers have been heard for IF material at $510/mt CFR. 

- The weaker Asian market has put pressure on ex-Iran billet prices. In the middle of the current week, Iranian producer Chadormalu Mining and Industrial Company sold a 30,000 mt cargo of steel billet, for July shipment, at $461/mt FOB, within the scope of an export tender. The material is likely to be shipped to Southeast Asia. The price is much lower than $500/mt FOB in the previous deal last week, which is explained not only by the worsening of the market conditions, but also by the fact that that the previous contract was for the Gulf market.

- Russian suppliers have had to cut prices for billets even despite the recent increase in the rouble exchange rate, which has made export sales less profitable. The tradable level for billet from Russia has slipped to $535-545/mt FOB, while late last week $560/mt FOB was the minimum possible price. Though some mills have left the market, not ready to cut offers again, already being near or under their cost levels, some Russian exporters have voiced lower offers and the market has been facing increased speculation about cheaper sales to Turkey. 

- On Monday this week, there was talk about an ex-Russia billet cargo of around 15,000-20,000 mt sold to Turkey’s Izmir region at $590/mt CFR. Some market players, however, report it was done at $600/mt CFR. This is already down from $600-620/mt CFR seen last week. 

- The workable billet price levels in Turkey have dropped to $575-590/mt CFR by the end of this week. The lower end of the range is reported to have been fixed in deals to the Izmir region for 8,000-10,000 mt. Another deal was rumoured at $562/mt CFR, but most market sources reported it is an old deal and is now being used to put pressure on scrap prices. Locally, the billet situation is not stable and the market is confused. There was a deal for 10,000 mt closed earlier at $630/mt ex-works Iskenderun at the time when the general level was at $670-700/mt ex-works. Today, most suppliers, who are not numerous, are voicing $650-665/mt ex-works as an indication. However, taking into account that the local rebar price has weakened to around $660-670/mt ex-works, the workable levels for billet should be at least $40-50/mt lower in order to cover the rolling cost. 

- The combination of a further weakening of prices in key destination markets and the local Indian market entering a new downtrend has put ex-India billet prices under pressure. Though limited trade activity has been kept alive by modest buying interest from the Gulf region, deals were reported at low prices, namely at $510-520/mt FOB, though most offers from private mills are at $550-560/mt FOB at the lowest.