Global View on Billet: Downtrend reverses in some markets, mainly cost-driven

- The downtrend seen in the global billet market over the past few weeks has reversed in some major outlets -Turkey in particular - this week, with prices rising rapidly. This unexpected move is connected with the sharp hike in energy prices in Turkey, which has pushed up longs prices in the country and has led to higher billet import prices expected in the near future. Apart from ex-Russia billet prices, which have increased indicatively, based on the situation in Turkey, other large exporters from Iran have managed to sell at higher prices this week, though the sustainability of the trend has been questionable, mainly because the situation in Asia, China and Southeast Asia has not improved and has been bad in terms of demand and prices.

- In Turkey, the announced 50 percent rise in electricity and gas tariffs for local industries is expected to significantly push up domestic mills’ production costs, which were already high. As a result, EAF-based billet production is foreseen to decline, and there will be less semis for sale in the free market. This may give a boost to billet imports, especially by Turkish re-rollers who will not have much choice, and Russia is a sustainable available source despite international sanctions. Billet from Iran and the GCC may be also in the picture, but high freight rates and long lead times usually reduce their competitiveness. On the other hand, despite wider opportunities for ex-Russia sellers, generally the demand and prices for billet in Turkey are expected to be limited by low longs demand and overall lower finished steel production. Some bids for imported billet have been voiced at $535-550/mt CFR early this week, while in the middle of the week $560/mt CFR was also said to be acceptable. The workable level, according some sources, has reached as high as $590/mt CFR on Friday. 

- Even before the announcement of new electricity and gas tariffs in Turkey, low offers from Russia seen last week from one supplier had disappeared. The SteelOrbis reference price for ex-Russia billet was increased by $15/mt on Wednesday to $510-515/mt FOB. On Thursday, it was hiked further, by $10/mt to $520-525/mt FOB. And finally on Friday, prices have hit $540-550/mt FOB Black Sea, posting a $47.5/mt increase over the week. The current level is mainly indicative as most suppliers from Russia have been waiting for a clearer market picture and have been asking for firm bids. The number of sellers present in the market is still small.

- Turkish longs producers have sharply increased their export prices, driven by the 50 percent hikes for electricity and gas prices. However, there are concerns regarding whether longs demand will be sufficient to support the new price levels. Turkish rebar export prices vary at $700-720/mt FOB for late September-October shipments, versus $645-670/mt FOB offered a week ago. Many view the new offer levels as somewhat overpriced, stating that the estimated cost increase due to the latest hike will be around $20-25/mt, while export rebar prices have risen by $50-55/mt. Local Turkish rebar market prices have surged to $700-710/mt ex-works, up $40-50/mt over the past week. 

- Iranian steel billet producers have maintained their efforts to push prices up even though the weak fundamentals in China have continued to undermine the certainty of market players regarding any likely success. Lately, two cargoes of ex-Iran steel billet for 40,000 mt and 30,000 mt have reportedly changed hands at $462/mt FOB and $465/mt FOB respectively. Although the destination remains unspecified so far, the material may be shipped to the GCC region, where prices are higher than in Asia now. According to market sources, the latest offers of ex-Iran steel billet to the UAE have been heard at $510/mt CPT this week. Last week, a major Iranian steelmaker Khouzestan Steel Company is reported to have sold a 40,000 mt cargo of steel billet at $455/mt FOB. 

- The import billet market in China has remained halted this week with tradable prices for imported billet slipping further, though they have already been below $500/mt CFR. As a result, most major sellers have focused on negotiations with other customers in Asia, Taiwan and Indonesia in particular. The average local billet price in China is at RMB 3,768/mt ex-warehouse on September 2, down by RMB 120/mt ($17/mt) over the past week. This price corresponds to $484/mt, excluding 13 percent VAT. The SteelOrbis reference price has declined to $480/mt CFR on Friday, down by $15/mt over the past week. Expectations for Chinese market developments have remained cautiously optimistic as September is usually a season for increased construction steel demand. 

- Some ASEAN mills have cut billet offers to Southeast Asia this week, which they had been holding stable earlier, as poor demand and the negative situation in China have been affecting sentiment. As the billet and scrap price trends are in opposite directions and as raw material prices are on the rise, a number of sellers have withdrawn offers. Offers for imported EAF/BOF billet from ASEAN have been reported at $535-545/mt CFR Manila, but, even though the level is similar to last week, previously only traders were offering at this level, while this week some BOF mills have already cut offers to $540-545/mt CFR, from $550/mt CFR and above a week earlier. 

- In Indonesia and Thailand, the most competitive offers are still from Iran. In particular, there has been information that one Indonesian importer has purchased ex-Iran billet at $510-515/mt CFR. Offers to Thailand from traders for ex-Iran billet for October shipment have been at $510-525/mt CFR with no new deals heard. A lot of 40,000 mt of billet for September delivery, redirected from another market, is still on offer to Thailand at $505/mt CFR.

- Billet suppliers from Russia’s Far East region have withdrawn their offers or have given very high levels to show their unwillingness to sell. Their previous offers were at $530/mt CFR or above and at least one deal was done at a slightly lower level to Taiwan.

- Indian billet export activity has fallen completely silent over the past week, responding to the further widening of the gap between bids and offers, even though local prices have declined. At least one government mill had put out a spot offer for 20,000 mt of prime concast billet with the lowest acceptable price assessed at $460/mt FOB, but it failed to receive any bid at such a level. Though not confirmed by the seller, trade circles speculated that the highest bid received was around $440-450/mt FOB and hence no deal could be concluded. This compared to bids at $450-460/mt FOB last week and $480/mt FOB achieved earlier in August.