Global View on Billet: Negative mood returns, but not yet reflected in many deals

Negative sentiments have returned in full scale to the global billet market this week as the Chinese market has resumed its downtrend due to the weaker-than-expected supportive measures announced by the government. However, the recent price declines have failed to be reflected in many deals so far, while next week is expected to bring more clarity.

On Thursday, October 17, prices in the local Chinese market fell due to worsening sentiments after the weaker-than-expected stimulus measures announced for the real estate sector, and this has made traders more confident that billet prices in the region will slip further. The Chinese reference billet price has settled at $460-465/mt FOB by the end of the week, with a few large traders announcing offers at this level, which is down by $10/mt over the past week. Nevertheless, activity in the FOB market has remained weak as market players have been waiting for more clarity next week and most mills have been focusing on local rebar sales lately. While last week some Chinese traders were hoping to get $490/mt FOB for billet in the near future, these expectations have now faded away. Market sources believe that prices from China will remain at the current levels for some time and that traders will try to sign deals in short positions before confirming deals with mills on FOB basis.

On October 17, Ni Hong, Chinese minister for housing and urban-rural development, stated that China will increase the amount of credit available for “white list” real estate projects to RMB 4 trillion ($562 billion) by the end of 2024. And though the amount of the new expenditure is high - up to RMB 1.77 trillion by the end of the year - market analysts believe it is not enough to change the current weak domestic demand picture, at least in the short term. Moreover, on October 18 it was announced that China’s GDP increased by 4.6 percent in the third quarter, slower than 4.7 percent in the second quarter and than the expected five percent for the full year.

The export billet price range from steel mills in the ASEAN region has widened significantly by the end of this week as some mills have confirmed lower prices to Asian buyers, while some, still having earlier shipment terms, have been maintaining higher levels. On Thursday, there was a rumor that an Indonesian mill had sold some limited billet volume (not above 10,000 mt) at $475/mt FOB, which is down from the seller’s previous reference price of $490-500/mt FOB. The material is for a local buyer in Indonesia and in general the producer is still not very eager to sell, with this latest deal done for late January shipment. On the other hand, a Vietnamese mill has been in negotiations for a billet volume for November-December shipment at $500-510/mt FOB. This week, one of the main importers from Latin America has made an inquiry for at least 30,000 mt of billets. Offers have been received at around $580-600/mt CFR from different sources, but the final decision has not yet been made, according to market sources.

Offers for 3SP and 5SP to the Philippines have been at $485-490/mt CFR, moving down by $5-10/mt over the past week, while bids have been heard at $480/mt CFR. A Manila-based source said that $485/mt CFR was discussed in the market by a trader going short for a while and that new deals should be at $480/mt CFR. Nevertheless, the latest deal for Indonesian 3SP billet for January shipment was equivalent to $490-495/mt CFR. If the market mood remains negative, traders will be more aggressive in short sales next week, sources believe.

In Turkey, given the rather unclear situation regarding billet offers from Asia, some buyers have been seeking to restock with material with shorter lead times. As a result, since last week a couple of deals have been closed from Russia at $510-512/mt CFR. In addition, a Ukrainian mill has succeeded in trading a medium-sized volume at $525-530/mt CFR for December shipment. Earlier this week, China’s billet export prices were at $525-540/mt CFR depending on the seller. However, following the latest slump, from next week ex-China billet prices may slip to $465/mt FOB or around $505/mt CFR and so buyers prefer to wait for a clearer market picture. No firm offers have been heard from Indonesia as the supplier there is reported to be sold out, while the indications from Malaysia have been evaluated at up to $540-550/mt CFR Turkey, with no interest seen.

The latest deals for Russian billet for prompt shipment to Turkey translate to $485-487/mt FOB Black Sea at the highest. For December shipment material, buyers’ price ideas were not above $500-505/mt CFR or $475-480/mt FOB last week. This means that sellers have managed to increase prices in this round of sales, after the previous contracts at $475-483/mt CFR signed in the middle of September. However, the bullishness has again started to fade this week, with the current tradable level for Russian billet for December shipment assessed at $495/mt CFR or $470-475/mt FOB depending on the volume. There have been some rumors of a low-priced offer of billet from Donbass, the Ukrainian territory currently occupied by Russian troops, at $490/mt CFR, but this has not been confirmed by the time of publication. And at least one source close to the seller in the region said that the last offer from Donbass was at $480/mt FOB.

Ex-Iran billet offers have moved up slightly from $450-460/mt FOB for December shipments to $455-465/mt FOB this week. However, most buyers are hesitating to book large volumes given the unclear situation in China. According to sources, Esfahan Steel Company (ESCO) has lately traded 60,000 mt of 150 mm 3SP billet for export at $466/mt FOB, marking the highest workable ex-Iran price level for the time being. The cargoes are most probably destined for buyers in the GCC, where CFR prices are now at $480-495/mt to Oman and the UAE. In Egypt, Iranian traders were offering at $515/mt CFR Damietta, versus bids around $10/mt lower.