Global View on Billet: Downtrend continues as China’s upturn not sustainable, scrap falls

The downward trend in the global billet market has failed to see a reversal in the past week and negative sentiments have continued to prevail even despite some tentative signs of an improvement due to the rebound in futures prices in China early this week. It seems that the fall in scrap prices, weak demand and the impact of the winter season will exert further pressure on billet prices globally.

The Asian billet market has been showing signs of reaching a bottom for the near future amid expectations for a further stimulus to be announced in China and given the rises seen in futures prices in China as a result. The ex-China reference price for billet has settled at $445-455/mt FOB, edging up by $2.5/mt on average since late last week. The latest deal prices have been reported at $445-450/mt FOB, done mainly to Asian buyers for different grades late last week and early this week. But by the end of the current week, most offers were at $450-460/mt FOB amid stronger iron ore prices. Nevertheless, since generally the fundamentals in November are weak and a demand rebound locally is unlikely in short term, expectations and announced production cuts in some cities have failed to alleviate the negative outlook. On Friday, November 22, rebar futures prices fell by 1.5 percent compared to the previous day, signaling a possible slowdown next week if no more stimuli are announced.

In Southeast Asia’s import billet market, prices have slipped further this week, with some deals done mainly for Chinese origin semis, which have remained among the cheapest in the region.  The offer prices for 5SP 150 mm billet from traders from China have been reported to the Philippines at $475/mt CFR for January shipment, versus $480-482/mt CFR last week, and some sources said discounts of up to $5/mt are possible on firm bids. One booking for a small volume of Chinese 3SP 150 mm billet was heard to the Philippines at $465/mt CFR early this week. Also, apart from Chinese billets, there was a rumor about an ex-South Korea billet sale at $470/mt CFR Manila, but there has been no confirmation by the time of publication and the market sources said that, if true, it would be 5SP billet. As for Indonesia’s import billet market, there have been no new deals reported after a sale of 5SP Chinese billet with high manganese content at $475/mt CFR and 3SP billet at $463-465/mt CFR, reported earlier this week.

Ex-ASEAN billet price levels have this week been significantly above ex-China prices - at $465-475/mt FOB. The official offer price from the Indonesian mill has been at $470/mt FOB for February shipment, while two weeks back the producer had been targeting $480-485/mt FOB. But no deals have been heard as most buyers are not interested in February shipment at the moment. At the same time, deals for Malaysian billets have been discussed lately for the Turkish market, where Malaysian origin material enjoys zero import duty. In addition to the sale reported last week for 150 mm billet at $513/mt CFR, market sources have reported that this week more volumes have been sold at $505-513/mt CFR for 150 mm and 165 mm billets. Moreover, one lot from a Malaysian mill has been taken in position by a trader at $475/mt FOB, SteelOrbis has heard.

In Turkey, buyers’ interest in billet imports has decreased recently, following the decline in import scrap prices and, thus, the decrease in captive billet production costs. In the meantime, there has been a slight rebound in billet prices from Asia due to the temporarily positive situation in China, with the price ideas of buyers and sellers thereby moving in opposite directions. The latest billet prices from China have been reported at $495-500/mt CFR, up around $10/mt since earlier this week. An ex-Malaysia cargo has been on offer at $515/mt CFR, following two deals at $513/mt CFR for 150 mm and 165 mm billet, with the latest transaction at $505-509/mt CFR. In the meantime, Turkey is not ready to pay anything much above $480-490/mt CFR for non-toxic origins and not above $460/mt CFR for ex-Russia and ex-Donbass billet. In the domestic market in Turkey, billet offers are in the range of $530-555/mt ex-works depending on the region, down from $550-570/mt ex-works last week. Turkish integrated producer Kardemir is expected to open its billet sales early next week, at an anticipated price of around $505/mt ex-works. The mill’s previous sales price stood at $520/mt ex-works for S235JR material.

Russian billet prices have also decreased over the past week, partially supported by the weaker local currency, but also amid lower demand and declining scrap prices. The latest offers to Turkey have been reported at $475-485/mt CFR, down $5/mt over the past week, but buyers’ bids in some cases have even dropped to $455-460/mt CFR, leaving no chance for deals, at least for now. In Egypt, ex-Russia offers in the current week have been reported at $500/mt CFR, down from sales closed earlier at $515/mt CFR for medium-size volumes. The SteelOrbis Daily reference price for ex-Russia billet stands at $450-455/mt FOB Black Sea, down $7.5/mt on average over the past week.

In Iran, there is hardly any business heard in the export segment, given slow demand and some concerns regarding this billet origin particularly in the UAE. The authorities in the UAE have introduced new standards for rebar, wire rod and billet imports, which will be used to track the origins of the raw materials and feedstock used. According to sources, Iranian origin materials in particular are targeted, and so imports of Iranian steel into the UAE are expected to diminish, at least for the short term. Currently, Iranian billet offers are still at $485-490/mt CFR Jebel Ali, while no new tenders have been closed recently. According to sources, small lots from EAF-based mills are available currently at $440-450/mt FOB, while the latest prices from the first-tier mills were at $460-465/mt FOB several weeks ago. In the local Iranian market, billet is available at IRR 25,700-26,300/kg at the IME, which is around $340-345/mt based on the $1 = IRR 69,400 exchange rate.

Ex-India billet offers are unchanged at $460-480/mt FOB, but these levels are considered notional, with mills led by government-run producers halting submission of offers since perceived workable prices and bids have been as low as $440-450/mt FOB following the surge in supplies led by sellers from China. Indian government-run mills, which have led exports of semis from the country, have not floated any export tenders for nearly a month and they are not heard to be negotiating any spot trades either. In the local market, the billet trade market has also entered a new downtrend, with prices losing INR 500-750/mt ($6-9/mt) over the week.