GLOBAL BILLET WRAP: Market factors push prices in different directions
Prices in the global billet market diverged in the week ended Friday November 2.
On one hand, an ongoing increase in import scrap prices in Turkey was rendering support to local and foreign billet suppliers, in the Commonwealth of Independent States in particular. On the other hand, CIS suppliers faced increased freight costs that complicated trading.
Besides that, the demand for billet in some markets was rather weak due to the lack of support from the finished long steel segment and consuming industries.
Domestic billet prices in northern China were 3,950 yuan ($569) per tonne on Friday, down by 50 yuan per tonne week on week.
The inventory for the product in Tangshan was at 180,000 tonnes on Friday, down 60,000 tonnes from a week earlier, said a regional billet trader, who received the information from an industry information provider.
The sharp inventory drop was due to traders’ destocking. Traders were pessimistic on steel demand and prices in the coming two or three months due to bad weather.
Meanwhile, no export offers were heard last week. Market sources calculated the export offers to be around $515-520 per tonne fob based on the domestic price, down $5 per tonne from the prior week.
In Asia, the demand for billet was rather strong at the beginning of the week, with a number of cargoes from the CIS, Iran and Malaysia heard sold within the range of $490-508 cfr.
Around 20,000 tonnes of billet from the CIS were sold to the Philippines at $508 per tonne cfr Manila on October 30.
Another CIS-origin cargo of similar tonnage was sold to Taiwan at $503 per tonne cfr.
Malaysia-origin materials were sold to buyers in Thailand at around $495-500 per tonne cfr early in the week.
Iran-origin material was heard booked at $490-495 per tonne cfr Indonesia.
By the end of the week, few bids were reported, with market participants in the Philippines largely inactive on November 1 and 2 due to the country’s national holidays. Those buyers were expected to return to the market on November 5.
“There are very few offers because exporters know it is useless to offer billet to us before our long weekend,” a trader in the Philippines said.
The rest of the Southeast Asian market also stayed away, sources said.
“Indonesian buyers have been very quiet, watching the billet price downtrend,” a Vietnam-based trader said on Friday.
Indonesian re-rollers indicated their interest at $500-505 per tonne cfr, while bids from Thailand were around $495-500 per tonne cfr.
Offers in the Philippines were reported at $505-510 per tonne cfr from the CIS, Turkey, the Middle East and Kuwait.
In Vietnam, export offers were sparse last week. “Vietnamese billet sellers are not interested in competing with the current low prices from Turkey and the Black Sea,” the Vietnam-based trader said.
CIS and the Middle East-North Africa
By the end of the week, when demand in Southeast Asia softened, CIS producers switched to the Turkish market, which started to show more interest in import billet due to the ongoing rise in import scrap prices.
Fastmarkets calculated the daily index for Northern European HMS 1&2 (80:20) at $331.67 per tonne cfr on October 31 [LINK], up from $322.80 per tonne on October 24.
In the middle of the week, offers for CIS-origin billet were heard in Turkey in the range of $470-490 per tonne cfr, depending on the supplier; bids did not exceed $465 per tonne cfr.
By the end of the week, several cargoes were heard sold within the range of $470-480 per tonne cfr, or around $455-460 per tonne fob Black Sea. In Egypt, CIS billet was offered at $477-480 per tonne cfr, but no deals were confirmed.
“Big projects are not paying... and buying has [slowed] for this reason,” one trader said.
Meanwhile, market participants reported that export from the CIS has been complicated by higher freight costs resulting from increased oil prices and reduced availability of vessels during grain shipping season.
“Freight from [Azov Sea port] Mariupol is over $20 per tonne now if you ship 10,000 tonnes of billet - normally it is $16-17 per tonne,” one source said.
Meanwhile, the cost of freight from Mariupol to Egyptian ports increased to $30-32 per tonne against $22 per tonne, according to another market participant.
The cost of freight from the Azov Sea is traditionally $6 higher than from Ukrainian Black Sea ports.
The cost of freight for a 10,000-tonne cargo from Russian Black Sea port Novorossiysk was said to be around $22-23 per tonne, according to another source.
Gulf Co-operation Council and Iran
No new prices were heard for billet imports in the United Arab Emirates because local rebar mills had enough material in stock to fill their needs for at least two months.
Besides that, the UAE decided to restrict imports of goods from sanctioned nations such as Iran, North Korea and Crimea.
“Customers [in the UAE] were signing documents confirming they will not buy any more sanctioned material,” a UAE-based trading source told Fastmarkets.
“Buyers got permission to bring their last cargoes,” another Middle East-based source told Fastmarkets. Therefore, no new bookings were heard done last week.
For Iranian suppliers, this means that the circle of their customers will now be even more limited. The country is facing severe economic sanctions from the United States, so buyers from the GCC and Europe don’t want to touch Iranian material.
“The Iranian market is almost closed now and banking issues are not the biggest problem here,” a Middle East-based source told Fastmarkets.
Shipping problems are the major issue at the moment, since no company wants its vessels to call at Iranian ports, the source added.
“Mills still offer and you can book, but you may never ship the material,” he said.
Offers for Iranian billet were reported at $430-440 per tonne fob on October 31.
One source reported a cargo for late-November/early-December shipment being sold to Southeast Asia at $440 per tonne fob, but it could not be widely confirmed in the market.
“We hear offers at $430-440 fob for Iranian billet, but this price is too high considering the risks that are involved in its trading,” a Middle East-based trader told Fastmarkets.
“I guess in a week or 10 days they will be selling at around $400 fob, as they do not have any other choice but to cut prices,” another source said.
Jessica Zong in Shanghai, Serife Durmus in Bursa, Cem Turken in Mugla, Fiona Lam in Singapore and Felipe Peroni in Sao Paulo contributed to this report.