GLOBAL BILLET WRAP: Price uptrend holds on, but customers turn cautious

The upward price trend in some of the major global steel billet markets continued last week, but its pace has slowed somewhat as customers have become more cautious about a possible downward correction in the near term.

The fact that Chinese suppliers are gradually resuming billet exports is one of the reasons there might be a downward price shift soon, according to market participants, as it would reduce the deficit of billet material in the East Asian country.

“Supply is becoming less tight,” a Chinese source told Metal Bulletin.

The other reason for the suggested price decrease is that there are stocks of billet being held by traders and mills around the world that have been built up in recent weeks at lower prices.

“Traders must sell what they have booked, so some technical correction might come, but [it will] not [be] too big,” an international trading source told Metal Bulletin.

“I feel customers are not rushing to buy any more,” a source trading billet to The Philippines, which are now considered to be the most promising market in Southeast Asia, said.

However, some sources noted that, even if the correction happens, it will be short-lived, and in the mid-term billet prices will increase again due to the soaring prices of electrodes in the global market, resulting from their shortage.

“China-origin electrodes are now being traded at $20,000 per tonne cfr, compared with $1,000 per tonne one year ago,” a source in Taiwan told Metal Bulletin.

Electrodes were in short supply, he explained, because units that had been manufacturing them – but which had been making losses at the lower prices – had been shut down.

Domestic billet prices in China were 3,780 yuan ($567) per tonne at 3pm on Friday, 10 yuan per tonne higher than they were last Friday, after frequent fluctuations.

On the export side, a deal was heard done $544 per tonne cfr Indonesia about ten days ago, which would be equivalent to $523-524 per tonne fob.

China’s export traders expect workable prices for new orders to be about $530 per tonne fob.

According to an export trader, a steel mill in Tangshan could easily supply 5,000-10,000 tonnes of billet in one or two weeks’ time for overseas buyers.

Meanwhile, customers in Southeast Asia were cautious about booking material from China.

“It is very risky to buy Chinese material now, when the [price] trend is not clear, as suppliers can change their minds and reconsider the price or cancel contracts,” a local source said.

Southeast Asia
The booking for Chinese material to Indonesia was not the only deal heard in the region at such a high price. A cargo of Vietnam-origin billet was also reported sold to the same destination at $544 per tonne cfr last week.

Another cargo from Malaysia was booked at $540 per tonne cfr, according to market participants.

Some sources voiced doubts that these deals were real, citing bids from the country at $520 per tonne cfr.

However, customers were in need of material as they have not replenished stocks that were depleted earlier and therefore had to accept the higher price, a source with knowledge of the situation said.

Meanwhile, in The Philippines, buying activity was rather modest last week. A 6,000-tonne cargo of Japan-origin billet was booked at $530 per tonne cfr.

“If the price is higher than this, customers will wait and see for a while,” a local trader said. “Anyway, almost all [customers] can stop buying [billet] because they have enough.”

Recent bids from customers in The Philippines were reported at $525 per tonne cfr.

Offers of Vietnam-origin billet were heard within the range of $545-555 per tonne cfr in the region, against last week’s range of $535-545 per tonne cfr.

CIS, Middle East-North Africa
Export offers from the CIS market have risen to $510-520 per tonne fob Black Sea this week from $505-510 per tonne fob heard a week earlier.

However, the market was rather quiet. Some customers were cautious about booking material, expecting the possible downward price correction in the near term.

The workable price was said to be around $500 per tonne fob Black Sea.

In any case, the majority of customers for CIS billet are in the Middle East-North Africa (Mena) region, which has been inactive because of an approaching religious holiday.

As a result, no new bookings have been heard in the market.

The most recent sale of Ukraine-origin billet was heard to Algeria at $510 per tonne fob Black Sea.

In Egypt, recent bookings of CIS-origin material were heard done by traders at $505 per tonne cfr. The estimated cost of freight to the destination is around $20 per tonne.

A buyer from Egypt did not expect there to be any deals until the end of the Islamic holiday on September 5.

In Turkey, offers of CIS-origin billet were heard at $520-525 per tonne cfr last week, but bids did not exceed $510 per tonne cfr.

No billet deals were heard in the country last week. However, demand for semi-finished products was expected to be strong in the near term due to the shortage of electrodes.

“Billet prices have been rising faster than scrap prices recently,” a Turkish source said. “The main reason seems to be the electrode shortage, as mills prefer to produce from billet rather than from scrap.”

Jessica Zong in Shanghai, Cem Turken in Mugla, Suresh Nair in Mumbai, Serife Durmus in Bursa and Felipe Peroni in São Paulo contributed to this report.

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