Global View on Billet: Prices keep surging, Russia tries to resume exports despite sanctions

- The global billet market has remained turbulent this week with prices in the major regions increasing sharply again amid a lack of supply and rising raw material prices. As shipments and new sales from Ukraine are still blocked due to the war Russia started against Ukraine, the shortages in the billet market have remained critical. Russian suppliers have been trying to find ways to continue exports, but for now trading from the Black Sea has remained halted and new contracts have been seen only to Asia from Russia’s Far East ports. Asian customers have had no other choice but to accept higher prices for billets, though they are still very cautious as regards buying ex-Russia billets and offers for ex-ASEAN material are going up every day.

- Buyers in the MENA region, North Africa mainly, have been trying to find substitute material for ex-Ukraine billets, as a large volume bought earlier will not be delivered due to Russia's war against Ukraine. Over the past week, buyers from North Africa were concluding deals mainly for ex-India and ex-Turkey billets, but offers have started to come from Asia too. According to sources, deals were closed in the wide range of $850-900/mt CFR to the region. Buyers have been ready to purchase at $850-860/mt CFR this week, but market activity has cooled down.

- Turkish exporters have been increasingly bullish, seeing rising demand (not only from North Africa, but also from southern Europe), higher scrap prices and very limited billet supply in general in the global market. As a result, export prices from Turkey have reached $910/mt FOB at the lowest by the end of the current week. Bids from Europe received by Turkish mills at $900/mt FOB have been rejected. Local prices in Turkey have exceeded $900/mt ex-works, which has helped push up export quotations too.

- Turkish buyers’ focus is still on their local market. After Turkish producer Kardemir sold 85,000 mt of billets locally at $880-885/mt ex-works on March 8, offers in Izmir have been reported at $900-920/mt ex-works and by the end of the week some suppliers have even started to voice $950/mt ex-works. Suppliers in Iskenderun were asking for $890-910/mt ex-works in the middle of the week, but on Friday there have already been no offers below $910/mt CFR. There has been a lack of import billet offers to Turkey recently and sources have said that Turkey has been willing to pay $860/mt CFR as of the middle of the week. Small lots of ex-Russia billet for prompt shipment have been offered at $900/mt CFR.

- Russian mills have started to offer billets more actively this week, trying to find ways to keep selling. In general, trading from Russia from the Black Sea has remained at a standstill for now due to two major factors - logistics and payment issues.

Some sources said that shipments from Novorossiysk are continuing despite sanctions on Novorossiysk Commercial Sea Port company. Some companies still have their insurance policies but clauses relating to war and military strikes on shipping are on hold for the Black Sea, though it is possible to cover these eventualities too but with premiums 20 times higher.

Most banks that were working with ex-Russia billets are rejecting LCs for any regular sales destinations like Tunisia, Egypt or Latin America. But several Russian banks are not under sanctions yet and in theory there is the possibility of working through them, also using alternative currencies instead of the US dollar and the euro, even though this will be more costly. According to market information, some steel and raw material cargoes have been sold to Turkey already and the payments were done in Turkish liras. For payments for Russian billets, market players may use Pakistani, Chinese or Turkish banks to avoid sanctions. In the future, China may buy Russian steel and sell it to the West, according to sources. A lot of traders are also considering the huge reputational risks of working with Russia.

- Despite everything, sales of ex-Russia billet have seen in Southeast Asia, with the material to be shipped from Russia’s Far East ports. After a deal to the Philippines at $760/mt CFR late last week, contracts have been reported to the Philippines again and to Taiwan, Thailand and some other buyers at $765-780/mt CFR from Russia this week. Though prices have increased, a number of difficulties in trading of ex-Russia billet have remained. In particular, freight rates have increased significantly, and not all vessel owners agree to go to Russian ports, even in the Far East. Also, not all banks agree to work with Russian material.

The tradable level for non-Russia and non-Iran billet in Southeast Asia has reached $800/mt CFR and one deal for ex-Japan billet has been reported at this level to the Philippines. New offers have been heard from some buyers in the Philippines at $820-830/mt CFR, mainly for ex-ASEAN billet. Mills’ official offers are rare and at $800/mt FOB at least.

- China’s import billet market has remained at a standstill as the gap between offers and bids has exceeded $100/mt. The SteelOrbis reference price for imported billet in China has settled at $660-680/mt CFR, up by $15/mt on average over the past week, but down $5/mt from the middle of this week. Instead of imports, Chinese traders are now evaluating the possibilities of billet exports. Offers were at $750/mt FOB in the middle of the week and have increased to $810/mt FOB or above by Friday. But no export deals have been reported so far.

- The imbalance in the global steel market stemming from Russia’s war against Ukraine has continued to result in higher prices for ex-Iran steel billet. After a sale at $670-675/mt FOB early in the week, for shipment in April, another tender for 30,000 mt of steel billet was closed at $680.1/mt FOB, as reported on March 10. But on March 11, all offers have already been seen at above $700/mt FOB, showing the bullishness in the market.

- Indian mills have been successful in consolidating ex-India billet prices at higher levels too amid rising buying interest in the Asian region, but sellers are mostly heard to be focusing on offering limited volumes available for overseas sales to distant emerging markets in the MENA region for higher achievable realizations. Ex-India billet prices have reached $750-760/mt FOB this week, which has been confirmed in deals, versus $720/mt FOB late last week. But on Friday sources have already reported that the next deals for Indian billet will be at $800/mt FOB or above, given the rapid increases globally.