Global View on Billet: Weakness remains, especially in Turkey, but positive signs emerge from China

- Billet prices have continued to soften in the major market globally with the Turkish market posting among the sharpest decreases due to lower scrap prices and the rapid fall in the rebar segment. Though the market conditions in China have also been poor, the rebound of futures and local spot prices in China has led to cautious optimism in the Asian region, at least for the coming one to two weeks.

- Import billet prices in Turkey have decreased this week in two steps from $575-590/mt CFR to $540-550/mt CFR in most offers, specifically for ex-Russia and ex-Donbass material. Higher offers were also voiced this week, but generally the workable level is assessed at below $550/mt CFR. The negative market situation for Turkey’s rebar and merchant bars has caused billet buyers to hesitate to make and import purchases. Moreover, the recent rebar sales locally at $585-590/mt ex-works have impacted the mood in the billet market. Some market players have been bidding $520-530/mt CFR, while some have decided to wait. 

- In the local market in Turkey, low-priced rebar sales have resulted in billet expectations at $570-580/mt ex-works, while earlier this week Kardemir opened its sales at $630-635/mt ex-works and the general level was at $620-640/mt ex-works. This means that the local billet market in Turkey, where prices were assessed as being high previously, lost as much as $80/mt over one week. 

- In such market conditions, prices for billets from Russian suppliers have dropped further by $30/mt to $510-520/mt FOB even though they were already in line with or below the costs of some producers. Very slack demand and falling bids from Turkey and North Africa, which are the main buyers of ex-Russia billets, are the principal reasons for the continuous downtrend.

- The bearishness in the Southeast Asian billet market has been also increasing over the past week with traders going short and some Asian mills also forced to cut prices on the back of poor market conditions. As a result, some deals have been done to Southeast Asia at much lower levels - at $505-515/mt CFR for ex-Japan EAF billet and ex-ASEAN billet from traders in short positions. There has been some reduction in mills’ offers too, though not as sharp as from traders, and market sources believe that prices could increase next week. A Malaysian BF-based mill has offered at $535-545/mt CFR Manila, while a major Indonesian producer has been asking for $530-535/mt CFR in the Philippines and $525-530/mt CFR Jakarta in the local market. 

- Prices for ex-ASEAN billets are expected to improve in the Southeast Asian region in the near future amid the cautious optimism prevailing in the Chinese market and ASEAN mills’ export sales to alternative destinations at better prices. Over the past week, at least two to three cargoes of 30,000 mt minimum each have been traded from ASEAN suppliers (Indonesia and Malaysia) at $530-540/mt FOB to such destinations as Africa and Latin America. The freight from the Far East to Latin America has been assessed at around $120/mt and prices have increased slightly from the previous ex-ASEAN trade at about $520/mt FOB, reported as having been done in the middle of this month.

- Optimism has emerged in the Chinese billet market this week. While early in the week sentiments were cautious with mainly futures prices on the rise, by the end of the week spot prices in China have posted increases of RMB 103/mt or $15/mt. So, the gap between tradable levels for billets in China and Southeast Asia has narrowed significantly lately. At the moment, the reference price for imported billet in China has been at $480-490/mt CFR, up from $480/mt last week, amid some increases in the local market. So, the gap is now only $30-35/mt, though it was $60/mt just last week. 

- Iranian steel exporters have been highly active in searching for customers abroad this week, concerned that prices will continue to move down further. One Iranian steel producer claimed that it closed its auction for steel billet at $490/mt FOB this week, though market insiders believe that tradable price levels are at $470-480/mt FOB maximum, given the current market developments in the regions to which Iranian exporters mostly supply. Meanwhile, two other ex-Iran steel billet tenders were reportedly closed at $461-465/mt FOB this week, compared to $460-470/mt FOB a week ago. 

- Sentiment among Indian billet exporters has continued to remain bearish, but more local sellers including government-run mills have returned with offers. Ex-India billet reference price levels have settled at $480-520/mt FOB, with the midpoint at $500/mt FOB as, even though official offers from mills have been at higher levels, the weakening of buyers’ price ideas in major markets has exerted pressure. The return of sellers was led by government-run steel producer Rashtriya Ispat Nigam Limited (RINL), which, after close to two months, floated an export tender for 30,000 prime concast billet with bids closing early next week. Sources believe that the government-run mills in India will target $510-520/mt FOB, but hardly lower.