Global View on Billet: Prices inevitably keep falling as China still has major impact

Prices for billet in the major trade destinations have continued to fall this week despite expectations for a stabilization. Early in the week, a slight rebound in ex-China billet prices amid the appreciation of the Chinese currency gave some hope that prices were bottoming out, but by the end of the week the downtrend of prices resumed, impacting all global markets. In general, the latest billet price declines in the international market have been gradual as they had already fallen by significant margins.

After remaining at higher levels of $455-465/mt FOB early this week, the ex-China 3SP billet reference price has finished the week at $450-455/mt FOB, down $7.5/mt week on week. And even lower levels have been heard from some sources on Friday. In particular, at least two traders have been in negotiations at $445-448/mt FOB with some material sold, according to market sources, though there have been no details so far. The lower numbers from China have not come as a surprise to the market, considering Chinese domestic prices and the Chinese currency having reversed most of its previous appreciation seen on Monday and Tuesday this week. The local Chinese market has remained weak due to the seasonally bad demand for rebar and the continued impact from the long steel standard change, while even maintenance works started at many mills have failed to support the market, at least for now.

A similar story has been seen for ex-ASEAN billet exports. After attempts to increase offers to $465-470/mt FOB, the leading Indonesian mill cut offers to the levels seen late last week at $460/mt FOB. Moreover, last week’s deals at $458-460/mt FOB seem impossible now and traders believe the workable levels for deals are closer to $453-455/mt FOB. The SteelOrbis reference price for ex-ASEAN billet has settled at $455-465/mt FOB, where the higher end represents the tradable ex-Malaysia billet price level. An offer kept at $475/mt FOB for some time already is no longer workable. As sales from the ASEAN region have been limited recently, it is expected that mills from this region will keep following the movements in China to close order books for September-early October shipment.

The falling Chinese prices have resulted in a softening in Southeast Asia’s import market. In particular, offers from traders (for mainly Chinese origin, but including those for open origin) to the Philippines have been at $466/mt CFR for 3SP and $471/mt CFR for 5SP, with some sources reporting deals being done, though no details have been disclosed so far. Some offers for 5SP were at $475/mt CFR Manila on the morning of August 9, while last week the reference deal price to Manila was at $480-485/mt CFR. In Indonesia, the offer level for 3SP billet has been at $465/mt CFR, down by $5/mt over the past week. Early this week, ex-Russia billet was traded at $468/mt CFR to Taiwan, while at the moment buyers’ price ideas are at around $460-465/mt CFR.

In Turkey, domestic mills’ interest in importing large billet tonnages has as expected declined this week, following heavy restocking done earlier. In the meantime, the suppliers have been taking a different approach in their prices. Billet indications from China were heard earlier in the week at $500-505/mt CFR, up $10/mt, but by the week’s end the levels of $485-495/mt CFR could be in theory workable, but suppliers are not active, being unwilling to sell in the slow market. Moreover, according to market information, some traders are willing to go short at similar or even lower levels at the moment for open Asian origins. However, no actual deals have been reported. Ex-Indonesia offers have been mainly heard at $500-505/mt CFR, while some Malaysian sellers had been ready to deal at $505/mt CFR, but pulled back the offers later on. Currently, ex-Malaysia billet is estimated to be at around $510/mt CFR. Ukraine is also in the market with offers at $515/mt CFR, stable over the past week.

While the large Turkish buyers are quite hesitant to continue restocking although a couple more deals for October shipment are expected, the smaller buyers have decided to restock with domestic billet. One reason is the good price provided by local producer Kardemir, another is a certain lack of available options from the Black Sea region and for small cargoes. As a result, Kardemir has managed to sell 44,000 mt of ready-stock billet, while the price for S235JR material was announced at $535/mt ex-works. With the payment and volume-related discounts, the actual price is evaluated at $509/mt ex-works for immediate shipments, which was obviously considered a good option. The indications for the local billet prices from other suppliers in Turkey are considered to be at around $545-550/mt ex-works with limited allocation available.

Ex-Russia and ex-Donbass billet offers to the Black Sea region of Turkey have been reported at $495-500/mt CFR for shipments in the near future, with no deals reported. However, there have been unconfirmed reports that billet from Donbass - the Ukrainian territory temporarily occupied by Russia - which has been excluded from export duties recently, has been on offer at $490/mt CFR and that even lower levels are possible, but buyers are considering that buying from this source is too risky. Given the problems with payments due to the sanctions on Russia and changed management at the three mills in Donbass as well as changes in their mode of trading, negotiations have been rare. Also, at least one Russian mill could be ready to sell at $490-495/mt CFR, if firm bids are received. The SteelOrbis daily reference price for ex-Russia billet has decreased by $5/mt over the past week to $470-475/mt FOB.

Ex-India billet prices have improved slightly, with mills remaining active in offering overseas, and with a few bids heard at a higher level after last week’s low. Also, Indian sellers have been supported by improved margins from the weakening of the local currency. Ex-India billet prices are at $460-465/mt FOB, up by $5-10/mt over the past week as the mood has been slightly better among sellers with bids seen in this range. According to sources, while government mills have been the most active in offering volumes of semis for sale overseas, one mill holding an export tender for 30,000 mt  of 150 mm billet this week has reported receiving a highest bid of $458/mt FOB, significantly higher than the $448/mt FOB received as the highest bid for a similar export tender late last month.