Global View on Billet: Major markets hit bottom for the time being

The international billet market has indicated further slight price declines this week, in both offers as traders with short positions have been active, and in deals. It remains impacted by the weakness of the Chinese market. For now, the bottom has been reached and for next week market sources expect a stabilization or slight improvement.

The Chinese market has found its bottom at $455-460/mt FOB from large mills and some sellers were even ready to provide $450/mt FOB in the middle of this week. Slow local demand, the selling off of the old rebar standard, and the lack of supportive news after the Chinese Communist Party plenum have all impacted billet prices. However, on Thursday and Friday, the mood started to change with futures prices in China and iron ore prices moving up. Market sources reported that panic selling of rebar has slowed and around 40 mills have started to cut production, which will ease the pressure on the market at least for the first ten days of August.

Ex-Indonesia 3SP billet offers dropped to $460/mt FOB early this week, down by $10/mt on average from the reference price last week. Moreover, some small deals and negotiations have been heard at $458-460/mt FOB for September shipment, down by $5-7/mt from the previous small-volume contracts. In particular, Indonesian 5SP billet was sold at $485/mt CFR to the Philippines last week. The Indonesian mill has been inviting bids at $475/mt CFR (translating to slightly below $460/mt FOB) in the local market for 3SP. Market sources said that for now the Indonesian producer still has some allocation for late September shipment as the latest deals were for limited volumes. One Malaysian mill has been keeping offers at not below $475/mt FOB, hoping to sell to Turkey where Malaysian material is duty free. Another mill in Malaysia has been actively selling rebar and wire rod, so discounts for billets could also be possible

Turkish mills have continued buying large billet lots from China and their demand has been supported by a further price drop seen over the past week. While earlier the prices levels were at $495-510/mt CFR, the most recent transactions for 45,000-50,000 mt have been closed at $486/mt and $490/mt CFR. The most recent offers from China have been reported at $490-495/mt CFR, those from Indonesia at $500-505/mt CFR (down from $515/mt CFR in previous deals), and the most recent offers from Malaysia have been at $515/mt CFR. Offers from Ukraine stand at $515/mt CFR base, down $5/mt from the previously closed transaction. According to SteelOrbis’ evaluations, over the past two or three weeks Turkey has booked close to 500,000 mt of billets, including Chinese, other Asian, and Ukrainian origins. Most of the cargoes are for end-of-August and September shipments and the most recent deals have been for shipments in the first half of October. More deals for large tonnages may be heard in the coming days, but overall, according to market sources, most Turkish mills will not be willing to buy many billets for delivery in November, which would increase their exposure to risks.

While Asian billet suppliers, particularly the Chinese, have been quite aggressive in their pricing and active in sales, Russian billet sellers have lost ground, being unable to compete. In Turkey, ex-Donbass billet has been on offer at $500/mt CFR, only on the back of prompt shipment and oriented only towards small customers. By the end of the week, there has been talk about a large Russian large producer offering billet at $490/mt CFR to Turkey, which is a reasonable level, but the information has not been confirmed by the time of publication. In Egypt and the MENA region, the lowest offers are estimated at $510-520/mt CFR, although some higher offers are also being voiced. The SteelOrbis daily reference price for ex-Russia billet has decreased by $5/mt on average to $475-480/mt FOB due to the absence of trade.

Prices for imported billet in Southeast Asia have found a temporary bottom, though some traders have continued to offer in short positions at lower levels compared to last week, while the majority of prices have been stable or have even posted some rebound. After a deal at $485/mt CFR for 5SP ex-Indonesia billet to the Philippines, no new booking has been heard so far. Some market sources have reported negotiations at $480/mt CFR for both Chinese and Indonesian material, but there has been no confirmation of deals having been done. Offers are at $490/mt CFR in the first days of August. At the same time, in Indonesia and Thailand, offers for ex-China 3SP billet are still at $470/mt CFR in most cases, though some negotiations on short positions were at $460-465/mt CFR early in the week. Such low levels have disappeared by end of the week.

Iranian billet exporters have revealed some activity during the current week, following a long period of absence. The electricity supply issue due to the seasonally peak demand is still a problem for Iranian mills and the capacity utilization rate in Iran has declined over the past few weeks by 50-70 percent, according to local market sources. Still, some mills have decided to sell some billet in the export markets, having cut prices from the previous workable levels. However, despite the discount, transaction prices are workable only in the UAE or Oman, while in Asia the levels from Iran are unacceptable due to the currently aggressive billet pricing from China. In particular, one Iranian mill has closed a tender for around 20,000 mt of billet at $462/mt FOB, while another has sold a medium-sized cargo to Oman at $472/mt FOB. The previous workable level was at $475/mt FOB in an export deal closed weeks ago.

Ex-India billet prices range at $450-460/mt FOB, compared to $460-470/mt FOB a week ago, as bids have been falling in the international market, though local prices have rebounded. According to sources, a government-run mill which held an export tender for 30,000 mt in the past week is reported to have received a highest bid of $448/mt FOB, below the $458/mt bid it had received for a similar export tonnage in the previous week. The sources said that, despite the low bid, the government mill has followed up with a fresh export tender offer of 30,000 mt, reflecting the surplus in the domestic market and the pressure to push volumes overseas. An Odisha-based private integrated mill has reported a trade for 20,000 mt at $450/mt FOB, but the destination was not disclosed by the seller.