Global View on Billet: Prices fall gradually due to weak demand in China

Prices in the global billet market have been moving down this week, mainly due to the negative trend in China, where declines in demand have offset the support from production cuts. Even though the outlook is still far from good as demand is unlikely to improve much next week, possible further declines in billets are likely to be limited by some stabilization in raw material prices.

The ex-China billet reference price is at $435-445/mt FOB, moving down by $5/mt from late last week. Most offers have been at $440-445/mt FOB during the week, but negotiations at slightly lower levels are also seen. Local inventories in China are still climbing and demand is sluggish and so billet exports may increase gradually to help with the pressure on debar from weak demand. The support from raw materials is also easing as iron ore fluctuates below the $100/mt CFR mark. Also, after seven rounds of local increases in coke prices,  the market is expected to stabilize. There has been talk about some billet [JF2] bookings at $435-440/mt FOB from China.

The leading Indonesian mill has followed and cut its official billet offer by $5/mt from late last week to $450/mt FOB, for November shipment. Its slab offers have settled even lower - at $445/mt FOB. But most ASEAN mills still have little interest in cutting semis prices too rapidly as their focus is still on sales of finished steel, i.e., HRC and rebar.

In Southeast Asia’s import market, the latest offers for Chinese 5SP billet in the Philippines have been at $460/mt CFR at the lowest by the end of this week. This is down from two deals done at $465/mt CFR late last week for 5SP Vietnamese IF and Chinese BOF billets. Now major buyers in the Philippines will target $455/mt CFR or so, to balance the previous higher deal price levels. Also, a deal for Chinese wire rod grade billet has been done to Taiwan at $457-458/mt CFR. The wire rod grade billet usually has extras of at least $5/mt. Though most offers for 5SP from China have been voiced at $460/mt CFR by traders, discounts can be negotiated.

Billet buying in Turkey has been limited to only sporadic deals considering sliding rebar prices and overall low sales of longs both locally and abroad. Domestic billet is now ranging at $500-510/mt ex-works depending on the region with buyers’ price idea being at $500/mt ex-works and below. Taking into account that workable rebar prices domestically have slid to $535-550/mt ex-works, billet buyers are awaiting a downturn in billet offers as well. Still, captive billet production costs in Turkey from scrap are estimated at around $500/mt. While domestic billet sales are quite slow these days, some of the Turkish mills continue to eye exports. A medium-sized lot for September shipment has been recently sold to Morocco at above $505/mt FOB. Offers to other North African countries have stood mainly at $507-508/mt FOB, with no positive response from buyers.

In the import segment, Turkish billet customers are refraining from booking Asian billet, taking into account long lead times and acceptable captive billet production costs since the import scrap price is relatively stable. Import offers from China have slid by $5-7/mt over the past week to $478-480/mt CFR in most offers, while $473/mt CFR indications from those going short have also been reported. Bids to China are still rare and not above $460-465/mt CFR, which does not suit sellers. Ex-Indonesia billet is evaluated at $484-486/mt CFR, while Malaysian material is at $495/mt CFR for 150 mm billet for October shipment. The latter might be accepted at $475-480/mt CFR, but the sellers do not find such a level workable. Instead, a 10,000 mt cargo has been recently booked from Ukraine at slightly below $490/mt CFR, SteelOrbis has reported.

Russian billet trade has also been relatively slow mainly due to the downward market expectations, despite the advantage of the shorter lead times compared to Asian material. Most Russian sellers have been aiming to trade at $450/mt FOB for October shipments although buyers are not ready to accept much above $440/mt FOB. In Turkey, the workable levels are at $460-462/mt CFR for small lots. In Egypt, some Russian material was sold from stocks at an Egyptian port at $490-495/mt CFR, while bids for new cargoes are much lower. The SteelOrbis daily reference price is now at $437-442/mt FOB Black Sea, down by $1.5/mt on average over the past week.

Ex-India offers have been kept stable by large exporting mills in the range of $440-450/mt FOB, but, unlike earlier weeks, some sellers have been more amenable to negotiate lower bids and conclude discounted deals. According to the sources, discounted deals which worked out on average $10-15/mt lower on FOB basis have also been driven by the local merchant trade of semis cooling down after the lower-than-expected rise in finished steel prices. A first tier eastern India-based mill has reported a sale of 20,000 mt to a trader at $430-435/mt FOB net of discount, the sources said. Another large integrated mill reported a deal for 30,000 mt for the Middle East market at $430/mt FOB or slightly below net of discount, the sources added.