Global View on Billet: Market uncertain amid shaky rebound in China

This week, after the sharp drop earlier in August, billet prices in the global market have been posting stability with a positive bias after futures prices finally rebounded in China. Nevertheless, for now the market is characterized by uncertainty as the uptrend in China has been slow and its sustainability is questionable due to persisting slow demand, while most buyers have stepped back from the market.

Chinese billet export prices have shown some signs of bottoming up, after falling as low as $420-425/mt FOB on Monday. Offers have recovered to $435-440/mt FOB by the end of the week and market sources have said that it is hard to sign deals with mills, which have been actively implementing production cuts in this period. Rising futures prices and some news of official support for the real estate market have been behind the rebound, though most market sources believe the market is very shaky with futures edging down on Thursday and Friday. One of the Chinese mills said that for now it seems that steel production reductions are insufficient and that, if demand stays as it is, prices will remain under pressure in the coming weeks. A few sales and negotiations were reported at $420-425/mt FOB early this week, while traders have been refusing to accept new offers at around $440/mt FOB.

Sentiments in the weak steel market finally received a tangible boost on August 21, after Chinese banks approved financial support totaling RMB 1.4 trillion for ‘white list’ real estate projects.

The ex-Indonesia billet price settled at $440/mt FOB early this week, down from $445-450/mt FOB last week, but by Friday it has recovered to $445/mt FOB. In any case, this level is considered too high for most buyers and no sizable deals have bene reported so far. At the same time, ex-Indonesia slabs have been offered at $440/mt FOB, dropping by $25/mt over the past fortnight. According to sources, one or two lots have been sold at this level, but this could not be confirmed by the time of publication. The slab price from Dexin Steel is $5/mt below its billet offer. China has been aggressive in billet exports, which has impacted ASEAN billet sales, but in the slab segment China has been not so active, with the main sales destination, Europe, being on holiday and with Chinese billet producers in a worse condition. One of the Malaysian mills has been indicating a billet price at $455/mt FOB or so.

Offers for 5SP billet to the Philippines have been heard at $465-470/mt CFR, up by $5-10/mt from late last week. Also, 3SP billet has been offered at $460-465/mt CFR, but mainly by traders “who have positions, as mills are not eager to sell,” a Manila-based source said. A sale of 20,000 mt of ex-China 3SP was done at $438/mt CFR Indonesia late last week, down from $445-450/mt CFR reported a week ago. However, offers to Indonesia for 3SP have now increased mainly to $455-460/mt CFR.

Turkey’s interest in import billet from Asian suppliers has faded for now, given the volumes booked earlier and the recent rebound in prices. Together with the long lead times from Asia and the potential issues with export licenses, large Turkish producers seem to have stepped away from the import market, at least for now. Ex-China billet offers have increased this week from $460-475/mt CFR to $480-485/mt CFR, while Indonesia and Malaysia are offering at $485-490/mt and $495-500/mt CFR, respectively, both up by around $5/mt over the past week.

In the Turkish domestic market, Kardemir has announced billet sales at a stable price level of $535/mt ex-works for S235JR grade and $550/mt ex-works for B420 grade. Given all the discounts related to order size and payment, Kardemir’s price is estimated at $504.9/mt ex-works. According to sources, the mill has sold around 35,000 mt of billet.

In the meantime, Russian and Donbass-based billet suppliers, who had been not able to compete with low ex-China prices earlier, have now tried to take advantage of their shorter lead times and the smaller volumes they have available. In particular, ex-Russia sales have been reported at $480/mt and $490/mt CFR depending on the tonnage and the seller, while an ex-Donbass cargo is reported to have been sold at $465/mt CFR. However, such a low level is not considered widespread now, though things may change with the recent fall in import scrap prices in Turkey. The SteelOrbis reference price for ex-Russia billet has dropped by $15/mt over the past week to $450-460/mt FOB. Aside from the toxic Black Sea-based origins, Ukraine has been in the market with $510/mt CFR offers for Turkey, up from the latest sale at $500/mt CFR base. However, given the unclear market situation and the limited allocation, the Ukrainian supplier has decided not to sell for now.

Export billet pricing from Iran has been mixed this week since Iranian mills are still feeling a strong impact from the energy supply situation in the country. Billet production has been reduced to 30-50 percent of capacity, which in theory could have supported billet prices from Iran. However, the sharp downturn in billet prices from China, which impacted price trends globally, has also put pressure on Iranian exporters. According to market information, Khouzestan Steel Company has lately closed a sizeable tender at $472/mt FOB. However, most market players believe the actual sales price is much lower since the disclosed level is not workable. In particular, there is no chance of selling at these levels to Asia, while in the GCC, which is a regular and higher-paying market for Iranian billet, bids have lately been at $450/mt FOB maximum for EAF-origin billet, while IF billet can be sold at around $420-430/mt FOB. As a result, the workable billet price level for ex-Iran prime quality billet is now considered to be at around $450-460/mt FOB. However, no actual transactions have been reported at these prices.

The ex-India billet reference price has settled at $438-445/mt FOB, up from $435-440/mt FOB seen last week. This is due to the slight increase in bids from buyers, based on recently improved sentiments in China. According to sources, a government-run mill which held a 30,000 mt tender, is heard to have received a highest bid of $438/mt FOB, slightly higher than $435/mt FOB received for a previous tender for 150 mm billet. It has been learned from trade circles that most large mills are seeing build-ups of inventories, following the slowdown in offtake by secondary rolling mills in reaction to sustained weak demand and the prices of finished steel. This is supported by the fact that a government-run mill has floated back-to-back export tenders aggregating 50,000 mt to close over the next week.