The continued sluggishness of the US economy, the collapsing housing market, the weakness of the automobile industry, as well as the traditionally slow summer months for the steel industry, have all contributed to the weak state of the US finished products market and the quiet market for semi-finished products.
Billet demand and supply have not seen any changes since last month: demand is poor, and supply is plentiful. During these slow summer months, most steel mills have reduced operations or are on summer vacation, meaning less end-product production and an increased availability of billets in the market.
In general, billet prices have come down slightly from a month ago. Today, billet prices in the US range from $480 /mt to $500 /mt delivered to rolling mills. On a brighter note, scrap prices have been bouncing back up slightly, which should influence billet prices positively.
World billet prices have been getting stronger in the last several weeks. CIS origin 3SP-5SP billets are now offered for export at around $500 /mt to $510 /mt FOB Black Sea for October shipments. With freight rates at about $55 /mt $60 /mt from Black Sea, the best available price range would be $555 /mt to $570 /mt CFR FO US Gulf, making import deals commercially impossible.
CIS billet prices indicate an upward pricing trend. Offers from Russian mills are higher than those of their Ukrainian rivals. Although not every market accepts these higher prices, the latest sales are heard to have been concluded at prices close to $500 /mt FOB Black Sea. Chinese billets are offered at about $530 /mt FOB levels due to the 15 percent export tax.
The most recent data from the US Steel Import Monitor show that during July 2007, the only countries that exported billets to the US were: Brazil, with 4,192 mt, and Canada, with 2,330 mt. Import volumes have been coming down since April 2007.
There is a lot of talk about exporting billets from the US to Europe and Latin America. However, statistics as of May 2007 reveal no significant semi-finished export tonnage except to Mexico and Canada. Still, the conditions for billet exports are ripe with the weak US dollar and weak US finished goods markets.
On the slab side, the market is quiet and there are very few transactions taking place. Demand is expected to come down gradually due to the continued weakness of the flat rolled market and increasing slab availability.
The current market price for slabs is around $480 /mt to $510 /mt FOB loading ports. Prices have come down by about $10 /mt since our last report on July 9.
Freight rates have increased dramatically since last month, with freight rates from Europe to US at around $60 /mt, from Brazil, around $65 /mt to $70 /mt, and from Asia, around $30 /mt to $35 /mt, depending on the size of the shipment. Slab suppliers have decreased their FOB prices even further to keep import prices more or less stable.
Heading towards the fourth quarter, slab prices are still trending slightly down due to new added slab capacity in Brazil, Turkey and Ukraine, as well as depressed coil prices in the US.
The largest quantities of import slabs arriving in the US during July 2007 came from Ukraine, with 140,995 mt, Mexico, with 136,422 mt, Russia, with 99,754 mt, Brazil, with 55,427 mt, and Canada, with 50,779 mt. Slab imports to the US during the same period also came from Italy, Australia, India, Japan, and Germany.