Global View on Billet: Uptrend in China brings optimism, Black Sea market lags behind

This week has brought some optimism to the global billet market as an upward trend has prevailed in China, following news of higher infrastructure spendings and steel production cuts in Hebei, while scrap prices in Turkey have also inched up by the end of the week. However, billet prices in the Black Sea market have continued to soften, reflecting still weak sentiments among Turkish and North African buyers.  

The ex-China 3SP reference prices have added $15/mt, coming to $500-520/mt FOB. They were at around $485-490/mt FOB on Monday, but starting from Tuesday futures prices in China have been on the rise after the news that China will approve over RMB 1 trillion or about US$139 billion in new sovereign debts, which will boost infrastructure construction. Moreover, production cuts in Hebei have been intensified due to environmental reasons with cuts by 30-50 percent of sintering capacities utilization rates. Rises in the local spot prices in China have been moderate, by around RMB 52/mt or $7/mt, but “today it is clear that the Chinese domestic market is increasing strongly due to the large gains in futures indexes,” a large Chinese trader told SteelOrbis on October 27.  

However, ex-ASEAN billet prices have failed to improve so far as mills have been trying to push volumes lately. A few deals for up to 40,000-50,000 mt of ex-Indonesia billet have been done by a mill at $490-494/mt FOB, versus the previous transaction at $495/mt FOB reported last week. One of the deals at the higher end of the range is rumored to be for the South American market, while another at the lower end is understood to be a trader’s position, according to a few Asian sources. Official offers from an Indonesian mill are still at around $500/mt FOB as the seller does not want to cut them, but “it is still possible to find $495/mt FOB even today,” a Singapore-based trader said on Friday. Moreover, there has been a deal for ex-Malaysia 3SP 150 mm billet to Turkey done by a Chinese trader at $518/mt CFR, which translates to below $490/mt FOB.

The rebound in the Chinese market has supported the mood in the import billet market in Southeast Asia, though the price rise there has been cautious. The SteelOrbis reference price for imported 3SP and 5SP billet in Southeast Asia has settled at $510-517/mt CFR this week, up by $5-7/mt over the past week. Buying in the Philippines has been limited and the achievable price for buyers is $510/mt CFR, in line with the previous deal reported last week as done by a Chinese trader for 5SP material. However, offers have been moving up during the week, from $510/mt CFR on Friday to $514/mt CFR on Wednesday and to $517/mt CFR on Thursday for 5SP 130 mm Indonesian material. In Indonesia, a deal for 20,000 mt of ex-China 5SP billet was signed at $510/mt CFR last week, while negotiations for similar material early this week were held at $510-512/mt CFR.  

In the Black Sea region, billet prices have fallen this week, under pressure from lower bids from Turkey amid rather negative sentiment in the scrap market. Still, there is a gap between the prices acceptable to Turkey and the FOB levels which Russian and Donbass mills are targeting in their sales. In particular, the bids from Turkey are mainly coming at $470-480/mt CFR, versus $490-500/mt CFR in offers (down $10/mt on the lower end over the past week). There has been talk about a $485/mt CFR Karabuk sale, but it has been denied by several sources by the time of publication. As a result, the highest level possible workable for Turkey is at $460/mt FOB, while the lowest levels according to the latest bids, is at $445-455/mt FOB, which is not yet acceptable to suppliers. Moreover, some of them, particularly the Russian suppliers, prefer to focus on domestic billet sales, where sales volumes and prices are somewhat more advantageous. According to sources, domestic billet prices in Russia are at $480-490/mt ex-works at sight, while some bids for 45-60 days’ deferred payment have been reported at $450-460/mt ex-works. Along with their local market, ex-Black Sea billet suppliers are expected to continue to focus on sales to Egypt, where workable prices are higher compared to Turkey. The latest offers to Egypt have been set at $520/mt CFR, which is still a decline from the previous sales at $530-540/mt CFR. As a result, the SteelOrbis daily reference price for ex-Black Sea billet has moved down by $5-10/mt over the past week to $460-475/mt FOB, with the midpoint at $467.5/mt FOB.    

Export prices for billet from Russia’s Far East region have also declined in new deals to Taiwan as buyers have been insisting on discounts, seeing falling scrap prices over the past few weeks, while suppliers have limited options where to sell. A few contracts were signed at $498/mt CFR early this week and at $495/mt CFR a little later. This is down from deals at $500-505/mt CFR last week.  

Iranian billet producers have managed to sell at least two large lots for export since the end of last week. However, the workable price for the product has softened compared to the previous transactions. One supplier has traded a 30,000 mt lot at $475/mt FOB for December shipments, while another producer has sold 30,000 mt at $470/mt FOB for November shipment. The previous workable level was at $477-478/mt FOB. The cargoes are expected to be sold to Asia and to the GCC, which are regular consumers for ex-Iran billet. In Asia in particular, there is a chance for a general CFR price rebound due to the relatively positive situation in China. In the GCC, particularly in the UAE, the latest offers from Iran have been reported at $500-505/mt CFR while the workable level is estimated at $485-490/mt CFR. In addition, there are talks with Jordan at $535/mt CFR, but no deals have been reported yet.    

Following the continued decline seen in the local billet market in India, some private mills have been showing a little more interest in the export market. A few small sales have been rumored over the past week at around $490/mt FOB. And though this is down from most large mills’ targets at $510-520/mt FOB during past weeks, the resumption of negotiations has been assessed as a rather positive sign. Local trade went down INR 400/mt ($5/mt) to INR 41,850/mt ($503/mt) ex-Raipur in the central region. 

* - latest deal prices