Sentiment in ex-CIS billet market has worsened over the past week as trading has slowed down and worries about potential lower demand from Egypt have emerged due to the change in the payment system there.
Most large CIS-based mills are still seen in the market at around $680-690/mt FOB and are offering closer to the higher end of this range, while some of them, having limited availability, are still offering at $700/mt FOB or higher. Prices have not been affected too much by sentiments now as supply has remained limited. But buyers are more cautious at the moment, feeling that prices have peaked.
Along with other factors making both buyers and sellers take a step back, the payment issue in Egypt and its potential effects on the billet trade are being evaluated. The Egyptian government has decided to make L/C-based payments obligatory for international trade, specifically for imports of goods including steel, while earlier most payments were made on CAD (cash against the documents) basis. “It is a normal practice for the country if it wants to monitor and regulate its foreign currency exports and this is more easily done via LC payments,” a source told SteelOrbis. Egyptian buyers, international billet sellers and traders are now evaluating the outcome and, in particular, how hard it will be to open LCs or to get credit lines from banks. At present, the large billet buyers (mills) are able to use LCs, but the smaller ones, who are dealing through traders, might have problems. “Basically, it will be costlier to pay with LCs and will certainly be harder for a lot of Egyptian buyers, and so until the system is settled and the market gets used to it billet imports may slowdown in Egypt or, let’s say, continue at lower, but still reasonable, volumes,” a source said.
Market players expect the LC-based payments to become obligatory starting from April 17, while previously it was expected to be implemented a month earlier. This way, traders in Egypt may find it less difficult to receive their payments from Egypt-based end-users for the cargoes sold earlier with CADs and to be delivered in April.
According to sources in the market, there have been no cancellations of contracts by traders who took positions for Egypt, and there has been no panic in the market. The latest deal for a relatively small volume of ex-CIS billet to Egypt has been reported at $715-717/mt CFR, but some sources believe it is for wire rod production, not rebar. The previous sizable deal from an Ukrainian mill was at $710/mt CFR for 30,000 mt, as reported by SteelOrbis last Friday.
The worries about lower demand from Egypt in the coming months have put pressure on sentiments, as even though most CIS-based mills are well-positioned now with most allocations for March and April sold out, Egypt was the most important sales destination. In January, all major mills in the Black Sea region sold the major part of their monthly allocation there.
Other North African buyers have been in the market with bids slightly below $680/mt FOB Black Sea, with no fresh deals confirmed.
The billet market in Turkey has been extremely quiet this week, mainly as most of the potential ex-CIS offers are quite distant from buyers’ price ideas. The highest levels Turkey would agree on were heard at $680-685/mt CFR for April shipments, which is basically the lowest current price idea from the large CIS-based mills. “Things are definitely slower this week, but workable levels in North Africa are still better for CIS mills. So, Turkey is still not in their focus,” a source told SteelOrbis. As a result, no serious talks for large tonnages have been heard in Turkey, but two deals for 3,000 mt each were closed for February shipment at $699/mt CFR Izmir. In the local market in Turkey, the indicative levels are still at $695-710/mt ex-works, with no fresh sales reported.
Though demand for billet from Latin America still exists, customers have also been cautious and not ready to accept higher prices. One deal for ex-Russia billet to Guatemala has been heard at $720/mt CFR, but from a port in Russia’s Far East region, not from the Black Sea, according to sources. Taking into account the weak Asian market and falling prices in China, suppliers have been looking for alternative markets. On Friday, the highest tradable level to the Philippines has been assessed at $700/mt CFR, according to re-rollers in the country.
“I believe that the [CIS billet] market may face some correction, but it will not last for long, until mid-March or so,” a market source said.
The SteelOrbis reference price has settled at $680-690/mt FOB, down by $2.5/mt on average from $680-695/mt FOB seen from late last week.
