The downturn seen in the Chinese market has as expected resulted in lower workable prices in the import billet segment in Turkey and, despite some serious tonnages that had been booked previously, buyers are expected to continue restocking with Asian billet in the short term. The main reason is that, while import scrap prices have inched up and are not expected to roll back significantly in the near future, buying billet from abroad is a cheaper option for Turkish mills compared to producing their own.
In particular, with scrap at $385-390/mt CFR, captive billet production costs for Turkish mills would be somewhere around $545-550/mt, which is a minimum of $25-40/mt higher than the Asian and Ukrainian options.
While around 150,000 mt of ex-China billet had been booked previously to Turkey by several buyers at $508-517/mt CFR depending on the grade breakdown, the latest realistic level is evaluated at $505-510/mt CFR for September shipments. At the same time, according to market sources, there has been a 50,000 mt billet sale from Indonesia at $515/mt CFR, which is considered to be on the high side.
Some market players believe that the above sale is due to suppliers closing previous short positions with Asian billets, while the workable price for imports is currently lower. “I think Turkish buyers will target $500-505/mt CFR this week. Mills will not buy today at $515/mt they will look for lower, but if someone is closing a short sale this is something different,” a trader told SteelOrbis. The latest offers from Malaysia have been reported at $515/mt CFR and slightly above with no fresh deals heard at the moment. In addition, in the past week a Ukrainian mill traded a total of 30,000 mt of billet at slightly above $520/mt CFR for September shipment. The offers this week from Ukraine are standing at $525/mt CFR for September shipments.
The number of ex-Russia offers has been scarce lately, following the deals at $505-515/mt CFR closed earlier in July. Given the weaker market in China, sources assume that the workable price for toxic ex-Black Sea billet will now not be higher than $500-510/mt CFR, which is high but compensated for by the possibility of buying in small lots and for prompt deliveries. The SteelOrbis reference price for ex-Russia billet has settled at $485-490/mt FOB Black Sea, down by $2.5/mt on average from late last week. Though there has been limited availability of lower-priced offers from Russia and Donbass (below $495-500/mt FOB), to conclude deals with Turkey sellers the suppliers will have to cut prices further.