In the second half of July, Turkish steel producers have been rather active in purchasing steel semis, including both billets and slabs. Large tonnages have been booked and even more deals may be concluded in the near future if import prices remain attractive enough. The main reason for such purchases is that in terms of costs the import prices for steel slab and billet are at least $30-40/mt lower than the cost of captive production based on an average scrap price of $385/mt CFR. “It seems scrap prices are not going anywhere near a downward trend at the moment and, while China is still aggressive and is pulling other Asian sources downward, Turkey will remain interested,” a market source commented to SteelOrbis. Currently, Turkey’s estimated production cost from scrap to billet is around $160/mt minimum, while the production cost from scrap to slab is close to $180/mt.
Throughout the past week, ex-China billet prices for the Turkish market have fallen to $500-510/mt CFR for September shipments, while the previous deals for around 150,000 mt were closed at $509-510/mt CFR Izmir and Marmara regions, and one of the deals was done at $517/mt CFR for mixed grades, sources reported at the time. According to the most recent market information, early this week another 50,000 mt were booked from China at $507/mt CFR. “Levels closer to $500/mt CFR and maybe slightly below might be possible, but that is most probably sellers shorting the market,” a trader said.
In addition to China, last week there was a 50,000 mt booking from Indonesia at $515/mt CFR, as SteelOrbis reported, while the latest offers for this origin have been reported at $510-512/mt CFR for September shipments. As for Malaysia, according to sources, one of the mills booked around 50,000 mt of billet last week at $520/mt CFR Iskenderun. This price has been assessed as high for the market and, even if true, no longer reflecting the market situation. This week, there has been talk about a sale of up to 50,000 mt to the Izmir region at $515/mt CFR, but it is mostly believed not to have been done. Some market sources report that only part of the initially offered 45,000 mt has been traded so far and the mentioned level was at $512-515/mt CFR. The most recent offers from Malaysia for September shipment to Turkey are at $518-520/mt CFR.
The SteelOrbis reference price for ex-China billet has inched up today, July 26, by $2.5/mt on average to $460-465/mt FOB, following some increase in steel futures prices, with iron ore rebounding to above $100/mt CFR again, and with some more mills planning to implement maintenance works. “Today, Chinese futures recovered a little, and the Chinese currency appreciated yesterday, though some losing some of its gains already today, and that should help bring some stability to the market. I fear scrap will be under pressure in the next few weeks as Turkey has bought a lot of billet and keeps buying,” a trading source said.
Chinese billet exports have been active over the past few months, but market sources said that this situation is fully due to the weak demand in the local market. And even though it is not expected to improve in the coming few weeks, the temporary improvement in rebar sales in China seen today and negative margins may prevent traders from being too aggressive. “The market has fallen too much since early this week and it has rebounded now due to production cuts at eight to ten leading mills… a bottom may be seen at the price levels observed in the middle of the week if prices of raw materials like iron ore are sustained,” another Chinese source said.
Ex-ASEAN billet prices have been at $465-475/mt FOB this week. One small deal for the Asian market has been heard at the lower end of the range, while offers have mainly been at $470-480/mt FOB for ex-Indonesia and ex-Malaysia billets.
In the slab segment, at least two Turkish hot rolled coil producers have booked large cargoes from Asia. According to sources, last week a 50,000 mt Malaysian cargo was sold at around $525-530/mt CFR Iskenderun, while another mill is reported to have purchased a cargo from Indonesia at $515/mt CFR. The most recent offers for ex-Asia slabs are at $510/mt CFR from Indonesia (for short positions) and $525/mt CFR from Malaysia. Russian slab offers are officially at $490-500/mt CFR, while levels $10/mt lower are considered possible during negotiations.
As for slabs, ASEAN mills have also had to slightly cut prices to remain competitive in the current weak demand conditions globally. So, offers have declined by $10/mt during the past fortnight to $480-490/mt FOB, while $475/mt FOB was also achievable for Indonesian slabs early this week.