Global View on Billet: China’s slump triggers more bearishness globally, though ‘Golden September’ starts

The global billet market has been bearish in early September as the sharp price decline has resumed in China despite all expectations and the already sharp losses previously recorded. ‘Golden September’ in China, so called amid the usual increase in construction steel demand, has been disappointing so far. Trading in the global market has been limited as this further price drop has been unexpected and the market is waiting for prices to settle first.

Chinese billet export prices have hit a new low this week as steel futures prices have posted rapid declines for five days in a row, reflecting the poor demand conditions. Also, a lack of supportive measures for the major consuming sectors and the relatively high steel supply have added to the bad situation. The ex-China 3SP billet reference price has lost $25/mt over the past week, hitting $420-425/mt FOB on Friday, even lower than the bottom level seen in in the second half of August before the rebound. Some traders may take a risk and take a long position from China in the near future, market sources believe. Steelmakers in Guangdong and Guangxi provinces said demand for steel may rebound in the September-October period, which would exert a positive impact on steel prices. However, CISA also urged market players to reduce production capacity utilization rates, or the rebounding trend may not happen.

The more negative mood than expected in China has impacted demand for ex-ASEAN billets. The main Indonesian mill has been offering at $445/mt FOB this week, in line with the latest deals done late last week. After selling 120,000-150,000 mt over the past ten days, the Indonesian mill was planning to increase offers to $450/mt FOB. But this has not happened, and the tradable level has even inched down to $440-445/mt FOB. The current Indonesian prices are not workable, considering the gap with Chinese offers has increased to $20/mt. The seller will wait to push November shipment volumes abroad. The previous deal prices for ex-Indonesia billet to Taiwan were at $462-464/mt CFR last week, while last Friday [JF1] the Russian mill in the Far East managed to trade 20,000 mt to Taiwan at $470/mt CFR. But this week these levels have already become unworkable, according to sources. Customers will target $440/mt CFR or below after the decline in Chinese futures.

Southeast Asia’s import billet market has been following the downtrend seen in China this week. As a result, prices have fallen by $15/mt to $450/mt CFR again. Most offers for 5SP 150 mm billet in the Philippines have been reported at $450-462/mt CFR, which is down significantly from $470-475/mt CFR last week. Offers for 5SP 130 mm billet are limited for now, and the Indonesian producer can offer this material only for December shipment due to repairs. In Indonesia and Thailand, offers for 3SP billet were reported at $450-455/mt CFR early in the week, while last week offers were not below $460/mt CFR. However, on September 5, negotiations were reported at $445/mt CFR in Thailand.

Import billet prices have decreased in Turkey, mainly dragged down by China, which has witnessed a sizeable drop in billet prices after the previous short-lived rebound. Some other suppliers, being partly sold out already, are not in a rush to follow the same trend, while some have softened their offers only slightly. In particular, Chinese billet offers have decreased from $480/mt CFR earlier to $465/mt CFR in the latest indications, which has obviously created some negative expectations in the market. Although the current offer levels from China stand at around the previous workable price range, there is no rush among Turkish mills to book. The main reason is the issue of Turkey’s inward processing regime coupled with Turkish mills’ desire to further evaluate market developments. Billet price indications from Indonesia have remained at around $480-485/mt CFR, but the supplier is said to be reluctant to give offers, being sold out. An ex-Malaysia 45,000 mt billet cargo, earlier available at $495/mt CFR, has been priced at $485-490/mt CFR by the end of the current week.

Billet offers from the Black Sea, namely from Russia and Donbass, have been reported at $485/mt and $480/mt CFR, respectively, versus $490/mt CFR seen earlier. Trade activity from these sources has been slow, but market players admit small lots may be booked by Turkish merchant bar producers if domestic billet prices in Turkey do not fall further. The SteelOrbis reference price for ex-Russia billet has declined by $5/mt on average over the past week to $460/mt FOB.

Ex-India billet prices have softened too, while local sellers have still been active in pushing sales overseas in response to the lower trade volume of semis in the local market. Ex-India billet prices are at $440/mt FOB, down by $10/mt over the past week. Though some mills are still indicating offers at $450/mt FOB, this has not been workable and does not reflect the current market situation. A government mill which held an export tender for 30,000 mt on September 3 is reported to have received a highest bid at $441/mt FOB, down from the bid of $452/mt FOB received in an export tender in late August.