Global View on Billet: China’s bearishness impacts most markets, outlook turns negative

The global billet market has been impacted by the downtrend which has accelerated in China. Overall trading has been limited so far as buyers believe prices still have room to go down further, while the resumption of some softness in the scrap market has added to the situation.

More Chinese mills have entered the market this week trying to push volumes abroad, seeing the depreciation of their local currency and the lack of improvement in local demand, together with the worsening of the outlook as the winter is coming. The SteelOrbis reference price for ex-China billet has lost $20-25/mt over the past week, coming to $445-450/mt FOB. The PBOC middle rate stands at $1 = RMB 7.1992 on Friday, November 15, versus $1 = RMB 7.1016 on November 5. Though the margin is small, falling raw material prices in tandem with declines in steel prices have made exports of billet attractive for Chinese producers.

ASEAN mills have also been impacted. Before a contract announced from Vietnam last week at $468/mt FOB, another lot to a Chinese trader was heard to have been traded by the same Vietnamese mill at near the same level. The current tradable level for ex-ASEAN billet has been assessed at $465-475/mt FOB, but in general the allocation is still not so big. A deal by a Malaysian mill has been rumored at the equivalent of $480/mt FOB for a large volume of 50,000 mt for the Turkish market where Malaysian billet is duty-free. Some sources said that the volume was 40,000-45,000 mt, and, in such a case, the FOB level would be $5/mt lower. There have been negotiations for 60,000 mt of higher-grade billet for Latin America. But market sources believe that at least half of the total volume will be taken from Brazil at a better price. With the freight and grade extras, ASEAN billet offers to Latin America will hardly be below $545-550/mt CFR, while from Brazil buyers may get $530-535/mt CFR.

Import billet prices in Southeast Asia have decreased this week amid active offering by Chinese traders, given the bearish sentiments in the local Chinese local market. A deal for Chinese 3SP was signed with an Indonesian end-user at $471/mt CFR early this week, while by the end of the week most buyers have been assessing the tradable level at $465/mt CFR already. Most offers for 3SP in Southeast Asia have been reported at $474-477/mt CFR during the week, while offers for 5SP billet in the Philippines have been reported at $480-482/mt CFR Manila. Late last week, a deal for ex-South Korea billet was signed at $490-495/mt CFR to Indonesia, but this was for vanadium-added billet “for high manganese content”. Chinese billet is the most competitive in the region this week.

Turkish buyers have been more interested in Asian billet this week. There has been information about a cargo of up to 50,000 mt sold by a Malaysian mill to a trader for Turkey at $513/mt CFR. However, some market sources assume it is to cover a previous short position agreed with the buyer some time ago at around $10/mt higher. The cargo is for approximately mid-January shipment. Market players assume that the lead times, which were previously unacceptably long, are now more attractive, following a couple of weeks of delayed demand. Large Turkish producers would now prefer to have at least one billet shipment in 30-45 days in order to average out their costs and to have more control over import scrap prices. Over the past week, ex-China billet prices have dropped from $510-515/mt to $490-495/mt CFR, with the highest estimated workable price at around $480/mt CFR.

Russian mills have not been so active this week, having sold some lots previously. While their nominal offers are estimated at $480-490/mt CFR, bids are still at $470-475/mt CFR maximum for sanctioned material. The SteelOrbis reference price for ex-Russia billet has been corrected down by $2.5/mt on average to $460/mt FOB, but most buyers are waiting for additional discounts given the downward trend seen from Asia.

Government-run mills from India, the more active Indian exporters of semis, have been out of the export market, but a few large private sector mills have dropped offer prices by around $10-20/mt to the range of $460-480/mt FOB. However, buyers in the Asian region have preferred cheaper ex-China alternatives, which have been offered aggressively, so Indian mills taking their cue have not pushed for export deals. In fact, according to market chatter, one eastern India-based based integrated mill is reported to have submitted an offer for 30,000 mt to an Asian buyer at $460/mt FOB, but negotiations were called off after bids were even lower at $445-450/mt FOB levels. A revival in local billet prices has also eased the pressure on local mills to sell overseas at discounts.