GLOBAL BILLET WRAP: Turkey's weak scrap market sparks domino effect

International billet prices have been rapidly dropping over the past week as sellers and buyers from several regions tried to adjust to the effects of a weaker ferrous scrap import market in Turkey.

Both import and export prices for billet have been freefalling in Turkey ever since the collapse in deep-sea scrap import prices in the country early last week.

Turkey is the world’s largest importer of ferrous scrap, and major changes in that market can spill over and affect those of semi-finished products, including slab, as well as finished steel such as rebar and wire rod as far away as in Asia.

In the first of this weekly global wrap, Metal Bulletin takes a look at the movements taking place in several key markets for billet.

Turkey
With China out of the market for the Chinese New Year holiday during the January 26-February 2 period, all eyes in the billet market were directed towards Turkey.

Export prices for Turkish billet had already plunged by $25 per tonne last week to $375-380 per tonne fob, as poor sales for finished steel led local mills to seek support in the semi-finished steel export market.

This week, Metal Bulletin’s weekly price assessment for billet exports out of Turkey went down further to $373-375 per tonne fob, while import prices for billet were assessed $40-45 per tonne lower, at $355-370 per tonne cfr.

CIS suppliers were heard to have reduced their offers into Turkey to $370-380 per tonne cfr, but buyers were unwilling to pay any more than $355 per tonne cfr, sources told Metal Bulletin.

CIS, Mena

Exporters from the CIS were in fact not only facing falling bids from Turkey, but also from Egypt, another of their key markets.

Billet was on offer to Egypt from CIS countries at $360-375 per tonne cfr this week, with bids coming in at $355-360 per tonne cfr, though no major deals were heard.

The falling raw materials costs have even prompted Ezz Steel, Egypt’s biggest steel producer, to cut its rebar selling price twice this week.

Elsewhere in the Middle East-North Africa (Mena) region, import prices for billet in the UAE moved down in tandem with the lower offers from the CIS.

Asia
In Southeast Asia, billet cargoes from Turkey were offered as low as $405-410 per tonne cfr in Thailand, $410 per tonne cfr in the Philippines, and $410-415 per tonne cfr in Indonesia early this week.

One transaction had already been heard concluded last week to Indonesia, but this week, market participants reported more offers in the market, both directly from Turkish mills as well as via traders.

Buyers in Thailand are already expecting to book billet at $390 per tonne cfr and below, while in the Philippines, offers from Turkey or the CIS of around $400 per tonne cfr could possibly attract interest, one trader said.

Meanwhile, in India, no export transaction was heard, but market participants are expecting prices to come down sharply over the next few weeks, to as low as $360-370 per tonne fob, from $400-405 per tonne fob previously.

Word of Ukrainian billet sold at only $385-390 per tonne cfr in Sri Lanka could force Indian mills to lower their offers to the island, one source told Metal Bulletin.

One major Indian steelmaker, however, is still expecting to receive bids of no lower than $390-395 per tonne fob for an export deal expected to be finalised early next week.



What’s next?
For the next few days, traders and buyers will look to both China and Turkey for market direction.

Domestic billet prices in China’s steelmaking hub of Tangshan have been unchanged at 2,810 yuan ($408) per tonne including VAT since January 19, but the country’s ferrous futures experienced a sharp drop on Friday, the first trading day after the Chinese New Year holiday.

“Sellers are expecting news about production cuts, such as the shutting down of substandard steel producers and local governments’ capacity cut targets, to push up spot prices next week,” a Shanghai-based trader said on Friday.

If such news fails to emerge, however, Chinese traders may start to take short positions in the billet export market in order to compete against the cheaper products from Turkey, the CIS and other sources, according to market participants.

Suresh Nair in Mumbai contributed to this article.

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