Global View on Billet: Rapid fall in Asia, demand worries push down prices in most outlets

- A downward trend has prevailed in the global billet market this week as negative developments seen in China and sharply falling prices in Asia have been impacting the international market as a whole. Moreover, demand has remained weak in Asia, Turkey and the MENA region, which has prevented positive movements in the billet segment, even though scrap prices in the Turkish market have been corrected upwards. 

- Ex-China billet prices have been falling rapidly this week, following declines seen in local and futures prices, though on Friday the futures market rebounded a little. Most market sources believe that China’s demand for construction steel will continue to worsen at the end of May and in June due to rainfall and that prices will remain under pressure from the lack of support from the government for the real estate sector and amid limited production cuts. The reference price for ex-China 3SP billet has slipped to $490-500/mt FOB, down by $30/mt since late last week. On Thursday, some offers from Chinese traders were voiced at $480/mt FOB, but they were mainly for short positions on Friday, not back-to-back with mills. Further developments in the raw material markets for iron ore and coking coal will be the main factors allowing Chinese billet exporters to keep cutting prices, otherwise they will go deeper into losses.

- Following the sharp drop in prices in China, traders have started to voice even lower prices in Southeast Asia’s import market with some offers and even rare deals reported at below the $500/mt CFR mark. Offers for 3SP 150 mm billet from Chinese traders for only China origin have been at $485-490/mt CFR to Thailand and at least one deal has been rumoured at this level to Indonesia. Offers to the Philippines have not been seen at levels as low as offers to other Southeast Asian countries. The lowest offers were for 3SP billet at $495-505/mt CFR, but, since over the past year a few IF-based producers in the Philippines have started operations and are able to offer 3SP billet, demand for this grade in the Philippines has been very limited. At the same time, 5SP 130 mm BF billet prices have been at $510/mt CFR or above. The reference price for imported billet in Southeast Asia has settled at $500-510/mt CFR, versus $515-535/mt CFR last week.

- Ex-ASEAN mills have also cut offers for billets, but at a slower pace than China. The leading Indonesian billet producer has cut its offers for 130-150 mm billets to $500-505/mt FOB, down by $5-10/mt since last week. No new deals have been reported so far as traders are taking their time before taking July shipment positions and as the market is still so bearish. The last offer from the Malaysian producer has been at $520/mt FOB officially, but market sources believe that the level is unreasonable in the current market conditions and may be easily lowered in negotiations to $505-510/mt FOB. Some market sources said that ASEAN mills have not been willing to cut offers further by the end of the week even seeing a worsening situation in China. They have been saying that the breakeven point is close and going down much below $500/mt FOB is unprofitable. Suppliers will try to accelerate sales of other products like slabs, rebar and wire rod.

- Ex-India billet prices have been under strong pressure from fresh market pessimism after tender-based export offers attracted below-expectation bids. A government-run mill which held a tender-based export offer of 20,000 mt on May 23 received the highest bid only at $478/mt FOB. According to a number of market sources, the mill has decided not to sell at such a low level since local prices are much better, even though domestic demand is fairly low. This price is compared to a similar tender bid earlier in the month at $485/mt FOB. The reference billet price from India largely ranges at $480-495/mt FOB, compared to $485-500/mt FOB a week ago.

- In Iran, one of the main local steel producers has managed to trade a billet cargo for export with a price increase, although the overall global price trend is not favorable, especially in Asian markets. According to sources, a mill sold billet at $492/mt FOB for 30,000 mt of 150 mm 3SP material. In addition, there was information in the market about another sale by another steel producer for 30,000 mt at $494/mt FOB Bandar Abbas. The most recent deal has not been fully confirmed by the time of publication, but market players generally consider the current pricing for ex-Iran billet at above $490/mt FOB, while the previous transaction was closed around 15 days ago at $481/mt FOB. Still, the sources find it hard to determine to which markets traders would sell these latest booked cargoes, since these price levels are not workable for the major sales outlets like the GCC, Asia and Turkey if traders’ margins and freight charges are added.

- Over the week, import billet prices in Turkey have moved down from $545-565/mt CFR to $535-550/mt CFR depending on the origin. The main reason is buyers’ low interest amid slow and low-priced longs sales, but also the increased number of suppliers in the market. The lower end of the range translates to realistic ex-China levels for back-to-back business, but lower prices are considered achievable from traders going short. India and Indonesia have been offering at $540-545/mt CFR, while Malaysia, which is a duty-free origin, has dropped its offers by around $10/mt over the week to $552-555/mt CFR. No deals have been reported from Asia at the mentioned levels, given that Turkey’s own billet production cost is estimated at $545/mt ex-works nowadays. However, a medium-sized cargo has been booked this week from Ukraine for a fairly short lead time at $545-550/mt CFR. No business and hardly any firm offers have been reported for ex-Russia and ex-Donbass origins. Suppliers’ indicative targets are estimated at around $550/mt CFR and above, which is certainly not workable against the Asian and Ukrainian prices. The buyers’ rare price ideas for toxic origins and for small lots are at around $530-535/mt CFR as of today. In the local Turkish market, the billet price has been fixed at $600/mt ex-works Iskenderun for around 5,000 mt, while no activity has been seen in other regions. Local buyers consider prices should be at $580-590/mt ex-works, according to the latest import billet situation. However, since negotiations are not heard, the mills are not yet ready to decrease their prices to these levels.

- The reference price for ex-Russia billet has been lowered by $5/mt on Friday after a $5/mt decline earlier in the week, coming to $515-520/mt FOB Black Sea as, even though most suppliers from Russia and Donbass have still been asking for $520-525/mt FOB at the lowest, the tradable level is already lower, according to a number market sources. The price idea from the rare buyers in Turkey for ex-Russia billet has been estimated at $530-535/mt CFR, translating to $505-510/mt FOB. Offers for ex-Russia billet to Egypt have been reported at $560/mt CFR, while bids were only at $545-550/mt CFR as reported early this week. Uncertainty due to the second round of the election in Turkey and downward pressure coming from China have kept buyers in North Africa away from purchases.