GLOBAL BILLET WRAP: Prices may recover if Turkish scrap prices rebound

Steel billet prices have gone down this week in most regions apart from India and China, following the downward trend seen in scrap prices at the beginning of the week, Metal Bulletin has heard.

A rebound in prices was expected, however, after positive signs came from the Turkish scrap market.

Turkish steel producers broke their silence in the deep-sea scrap markets on Thursday October 5, and this was expected to support higher prices in the coming week.

Billet prices in China were stable this week as the country was on its week-long National Day holiday, which started on October 1.

Southeast Asia, India

Southeast Asia billet import prices have gone down over the past week with lower offers being heard, pushed down by the decline in China’s domestic semi-finished product prices, as well as the continued fall in raw materials costs.

No bids or deals were heard as buyers said they wanted to see more clarity in the market after the National Day holiday in China.

China-origin billet was heard offered to Indonesia and the Philippines at $530 per tonne cfr.

Russia-origin billet was also heard offered to the Philippines at $530 per tonne cfr, according to one source, while Taiwan- and India-origin billet was heard offered to the same area at $535 per tonne cfr.

These offers were down from the $540-545 per tonne cfr prices from China, India and Russia heard in the previous week.

Market participants were divided about whether billet prices would fall further after China comes back from its holiday.

“The chances are equal that billet prices will rise or fall. On one hand, there is some demand for billet, but on the other hand, raw materials prices are falling,” a trader said.

“The supply situation is relatively tight due to the production cuts in China,” another trader said, “so I don’t understand why the billet prices should fall.”

The weekly billet export assessment out of India rose to $475-485 per tonne fob, from last week’s $460-475 per tonne.

The assessment was based on traders’ idea of a workable price for India’s exports of billet, which is produced through the blast furnace (BF) route.

There were, however, no BF-sourced billet export transactions heard this week.

CIS, Middle East-North Africa
Prices in the Black Sea billet export market plunged at the beginning of the week, as offers from CIS-region suppliers to Turkey and Egypt went down, tracking the negative dynamics in Turkish import scrap prices.

However, through the end of the week, a deal for Ukraine-origin billet was said to have been concluded at $485 per tonne fob Azov Sea, according to several sources.

The price would be equivalent to $490 per tonne fob Black Sea.

A source on the CIS producers’ side said that the workable price was $490-500 per tonne fob Black Sea.

Egyptian prices for imported steel billet fell this week, as the material was offered from the CIS at $515-525 per tonne cfr, but no deals were heard.

One trader believed $515 per tonne cfr to be a workable price.

The steel billet import market in the UAE was slow this week, as offer prices fell earlier in the week. Iran was offering billet to the UAE at $500 per tonne cfr.

“This week, everything is very slow because China is on holiday,” a trader said.

Turkish domestic and export billet prices have gone down in line with the weakening scrap prices, while imported billet prices have been comparatively stable over the past week.

Metal Bulletin’s weekly price assessment for domestic billet in Turkey was $500-510 per tonne ex-works on Thursday, down from the $510-520 per tonne of last week.

However, market participants believed that prices were at bottom and no further decreases were expected.

“I think the market has made a downward correction and this is the bottom level. I expect no further decreases, with the current [graphite] electrode [supply] problem,” a Turkish source said.

Meanwhile, imported billet prices were comparatively stable, as offers from the CIS region were around $515-520 per tonne cfr, although buyers would not pay any more than $490 per tonne.

On the other hand, the shortage of electrodes, which are used in electric arc furnaces (EAFs), sent the price gap between Turkey’s imports of billet and scrap to a five-year high in September, according to Metal Bulletin data.

This was driven by the electrode shortage, which triggered a shift by mills away from sourcing scrap toward the use of billet.

Metal Bulletin’s price assessment for billet imported into Turkey hit a peak of $530-535 per tonne cfr on September 21 before falling to $495-510 per tonne cfr on September 28.

This put the premium for billet over imported HMS 1&2 (75:25) scrap at $222.50 per tonne on September 22 – the widest gap recorded by Metal Bulletin since June 2012, when steep gains in billet prices pushed the gap to $260.00 per tonne.

Metal Bulletin’s price assessment for Turkish imports of HMS 1&2 (75:25) scrap was $290-304 per tonne cfr on September 29, reducing the gap between imported billet and scrap to $205.50 per tonne.

However, this was still sharply up from the $110.50-178.00 per tonne premium for billet over scrap in the year to the end of July 2017, when the premium to scrap began ramping up.

“[The] last time we saw [the premium] approaching the $200 per tonne mark was in June 2013, and the peak was followed by a steep fall in prices,” Metal Bulletin Research (MBR) metals analyst Shruti Salwan said.

A source in India agreed that there was likely to be a price correction. “The billet price is going to fall fast – $220 per tonne [was] a very big [premium] and next week is a holiday in China,” he said.

However, he was less certain about the medium-term direction for the billet-scrap price gap, and said that this would depend on whether China re-enters the billet market as a buyer or seller when activity resumes after the National Day holiday.

A Middle Eastern source told Metal Bulletin that European scrap market participants will play a key role in determining the price difference between imported billet and imported scrap in Turkey.

“The [gap] will close when the big European [scrap] sellers re-enter the market,” he said.

Graphite electrode prices are now $22,000-$40,000 per tonne, up sharply from around $2,000 per tonne in 2016, according to delegates at the International Rebar Exporters & Producers Assn (Irepas) conference in Athens last week.

This has been driven by the reduction in electrode supplies from China after a government crackdown on pollution led to the closure of some electrode plants, sources at the conference said.

Suresh Nair in Mumbai, Nadia Popova in Moscow, Serife Durmus in Bursa and Reginald Ajuonuma in London contributed to this report.

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