Global View on Billet: Trend to switch to upward as scrap rebounds, fundamentals not very strong yet

- The prices for billets in the global market have hit bottom, according to sources in different outlets. And in some markets, suppliers have already started to voice higher prices, following the rebound seen in the scrap segment. Some billet sellers have decided to leave the market as they are planning to come back with higher offers next week. However, except for the positive sentiments in scrap, the fundamentals seen generally have not been such stronger, and so the confidence of market sources in a strong rebound of billet prices is not very high, at least for now.

-  Most Russian billet sellers have left the export market by the end of this week as they have witnessed a strong enough rebound in the scrap segment in Turkey, and so they are planning to come back with higher offers next week. As a result, the levels of $490-500/mt FOB reported as tradable and the reflecting last deals, have increased to $500-505/mt FOB on Friday. “I would say that now the lowest possible price would be $500/mt FOB,” one source said, while another market player claimed that some mills would wait for $540/mt FOB or even higher to offer visible volumes again.

- Early this week, a deal for ex-Russia billets was done at $540/mt CFR to Turkey, according to a number of sources. This translates to around $500/mt FOB Black Sea. The slightly higher price compared to the tradable levels discussed at $520-535/mt CFR last week to Turkey is connected with the fact that this deal was done by a mill for Russian origin material, while the previous sales were discussed for Ukrainian ex-Donbass billet, sold by the Russians usually at lower levels. Early this week, the upward sentiments were not as strong as on Friday. 

- The import billet price trend, seen in Turkey for several previous weeks, seems to have been reversed now. The main reason is the rebound in the import scrap segment, which has improved the sentiment in the longs market and provided a justification for billet suppliers to resist discounts. While earlier the levels in small deals were at $520-530/mt CFR Turkey, specifically for ex-Donbass material, the latest transaction has been reported at $540/mt CFR. By the end of the week, when the scrap uptrend has strengthened, Russian billet sellers have stepped away from giving offers. Some of them report they expect to sell at $540/mt FOB, while some have voiced targeted levels of $600/mt CFR and above. Aside from the Russians, according to sources, some Azeri billet was sold this week at $580/mt DAP, though some players believe it may have been of Iranian origin. Along with scrap, active rebar sales in Turkey have supported the billet trend. Several cargoes were sold for export, but also locally there has been active buying, though mainly connected with the government tax investigation, which has hit large trading companies and third parties working with them.

The improvement in the import segment has resulted in a better mood in the domestic market in Turkey. Barely any offer has been heard this week in the domestic market except for Kardemir, which announced $590-595/mt ex-works depending on the steel grade. On the opening day of sales, Kardemir sold around 7,000 mt of billet since buyers believed the price was too high. However, by the end of the week many considered the level to be normal. Kardemir is expected to reopen sales in the first half of July in order to take advantage of the increasing market. Export offers from Turkey are indicative and are standing at $580-600/mt FOB, but earlier this week a cargo was sold at $550/mt FOB.

- In Asia, the Chinese market has posted an increase, which, however, failed to improve import trading. While last week, the lowest bids were reported at $500/mt CFR, this week the reference price for imported billets has increased to $520-530/mt CFR. Since last week, Russian suppliers have been ready to sell at $550/mt CFR to China, but this level is considered too high for both last and this week. Some market sources agree that the reasonable level for ex-Russia billet is $530/mt CFR, but, since there is not much interest from China and as scrap is on the higher side, sellers are not active in giving firm offers at this level. The local ex-warehouse average price in China has increased by RMB 105/mt ($16/mt) over the past week. 

- Some suppliers of billets have attempted to increase prices in the Southeast Asian market, also reflecting the rebound seen in the scrap market lately. But most customers have been saying that this hike is not supported by fundamentals since finished steel consumption in the region is very low and long steel prices are stable or have even continued to go down. There has been information that an ex-Malaysia 5SP billet lot has been offered and sold to the Philippines at $585/mt CFR this week, while most offers for EAF/BOF billet from the ASEAN region are at $580-600/mt CFR, up by $5-10/mt from last week. Offers for ex-Russia and ex-Iran billets to Thailand have been heard at $580-585/mt CFR, but no deals have been reported yet. 

- A major Iranian steelmaker has reportedly closed its export tender for 30,000 mt of 3SP modified steel billet for delivery at the end of July at $517/mt FOB. The price is $13/mt lower than the level in the tender closed the previous week by another Iranian steel mill. Since the mood and the tradable levels have not improved much in the major sales destinations for Iran - in China and Southeast Asia - the tradable FOB price from Iran have slipped further to $490-500/mt FOB. Even though scrap prices moved up, billet suppliers are waiting for some demand first to see if buyers can accept higher levels, which is doubtful for now. 

- Meanwhile, Indian government mills, usually the most active exporters of semis, continue to desist from export trades. A tender heard held this week seems to have been canceled due to a limited number of participants and bids hardly above $530/mt FOB. Private mills have cut ex-India tradable prices to $560-580/mt FOB, compared to $570-590 FOB a week ago. The new level corresponds to $610/mt CFR Southeast Asia on average, while buyers were seeking valuations of below $585/mt on CFR basis and some bids received from Gulf buyers have been as low as $570/mt CFR.