Global View on Billet: Sentiment positive despite energy shortage in China

Friday, 01 October 2021 18:07:51 (GMT+3)   |   Istanbul
       

- Most major billet exporters in the international market have been bullish this week, even despite some demand worries emerging in China due to the restrictions on re-rolling operations, caused by the energy shortage in the country. The price increase in the scrap segment and firm outlook for billet demand later in October have been among the main reasons behind the optimistic mood in the global billet market.

- Overall demand for billet in China has retreated this week, following the tightening of restrictions for energy consumption in a number of provinces, such as Zhejiang and Jiangsu. During most of September, the restrictions have mainly affected crude steel production and demand for imported billet has been firm. But lately sentiment has changed as energy consumption cuts have started to impact re-rollers, with some of them having been asked to cut production by 50 percent or halt operations up to the end of the holiday (October 1-7). As a result, most deals (from ex-CIS, ex-India and ex-Middle East, and from Turkey) were at $700-705/mt CFR, versus contracts at $705-715/mt CFR last week. 

- Two deals for ex-ASEAN origin billet have been rumoured to China at almost stable since last week at $710/mt CFR. But a Vietnamese seller has denied one of the sales, while confirmation of the contract from Indonesia has not been received by SteelOrbis by the end of the week and one trader affirmed that “this level was possible only for an additional small volume for an order done a week ago.”

- China is going to ensure energy usage for civil use for the start of winter, but the further impact on steel producers in October-November is still unclear. 

- CIS-based billet exporters have still been focusing on sales to the Asian market. And a deal for 40,000 mt of billet from Ukraine to China at $705/mt CFR done last week has come to light this week. This price corresponds to around $605/mt FOB, taking into account the current freight rate. The new targeted level is $600-605/mt FOB. 

- Indian integrated steel mills led by government-run producers are still targeting $630/mt FOB and the lowest possible level has been at $620/mt FOB, but unlike last week, when the highest deal price level reached $629.5/mt FOB, no fresh contracts were reported this week for EAF/BOF billet. “Indian BF mills are looking for $630/mt FOB amid expectations of  a better local market coming into October despite weak export demand,” a trading source told SteelOrbis. 

- Domestic billet trade is expected to be under even more pressure in the Gulf Cooperation Council (GCC) region, taking into account the recent sizeable drop in rebar prices announced by key local producers. In such a situation, large billet sellers in the region are expected to continue focusing on export sales. One of the Omani mills is aiming to sell at $655/mt FOB, with estimated freight of $60/mt. A deal from the Gulf has been rumoured as done at $700/mt CFR this week to China, but for billet with size 165 mm. 

- Although billet trade remains challenging in Turkey, some buyers have decided to restock in the domestic market and, moreover, and some of them have appeared to be ready to pay a higher price compared to last week - $620-630/mt ex-works. 

- The expectations for China’s import market after the holiday (October 1-7) are optimistic as local rebar prices will remain supported by crude steel production cuts in the country. “China will return positively and restock, and so I believe prices will go up to $720/mt [CFR] again,” an Asian trader said. 

 

Market

Price

Weekly change

CIS exports

$600-605/mt FOB

+$5/mt

China imports

$700-705/mt CFR

-$5-10/mt*

SE Asia imports

$690/mt CFR

-$10/mt

India exports

$620-630/mt FOB

+$7.5/mt

Iran exports

$635-640/mt FOB

stable

Turkey local

$620-630/mt ex-works

+$5/mt

Turkey imports

$610-625/mt CFR

+$9/mt

Turkey exports

$620-625/mt FOB

-$2.5/mt

* - the change compared to deals prices last week


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