GLOBAL BILLET WRAP: Prices rise further but show signs of reaching peak

Prices for steel billet rose again in most global locations this week, amid a new round of increases in the costs of raw materials, but market participants reported weak buying activity and fears that prices could be close to a peak.

Raw materials
Scrap prices continued to climb over the past week, after breaching historically high levels in the previous week, due to reduced supply.

Metal Bulletin’s daily index for HMS 1&2 (80:20)-grade ferrous scrap of Northern European origin reached $347.05 per tonne cfr Turkey on Friday August 18. This was up from $344.55 per tonne cfr Turkey on August 11.

Turkish mills started selling finished steel products for end-October and November production last week, and needed to secure scrap purchases even at higher prices.

The price of coking coal was also on the rise amid supply problems, with the Metal Bulletin premium hard coking coal index reaching $201 per tonne cfr China on Friday.

And Metal Bulletin’s daily index of spot 62% Fe iron ore prices reached $77.94 per tonne cfr Qingdao on Friday, up from $75.19 per tonne cfr on August 11.

China
After several months of rises, billet prices in China started to show weakness this week.

Billet prices in the country fell to 3,770 yuan ($564) per tonne on Friday, a decrease of 80 yuan ($12) per tonne from the previous week.

But the product’s price remained high, and no deals were heard for exports, as the Chinese domestic market remained more rewarding.

The country’s domestic rebar market also saw little trading, with regional prices going in opposite directions this week. In Northern China, rebar prices were up by 60-70 yuan ($9-10.50) per tonne compared with the previous week, while in the east of the country, prices were down by 50-70 yuan ($7.50-10.50) in the same comparison.

Due to the high price of billet in the country’s domestic market, Chinese traders were interested in buying billet from Brazil, to allow them to sell finished material into Southeast Asia and the Middle East.

At least one deal for billet supplies was heard at $470-475 per tonne fob Brazil last week. Recent offers were made within the range of $510-520 per tonne fob Brazil, according to some sources. Other traders believed that new offers would be around $500 per tonne fob Brazil. No billet was imported into China.

Freight rates from Brazil were estimated to be $20-30 per tonne.

Southeast Asia
Most buying activity was heard in The Philippines this week, with deals being closed at $520-525 per tonne cfr. Purchases included materials from Vietnam, Taiwan and Mexico.

Chinese traders were active in the region, re-selling material from different origins, with offers within a wide range of $520-580 per tonne cfr. Sources were not sure whether any part of these offers were for China-origin material.

A Chinese trader sold 130mm Iran-origin billet to The Philippines at $520 per tonne cfr.

Nevertheless, there were rumours that Chinese mills were showing interest in the export market, as their domestic prices weakened. Offers of Chinese billet were heard at $540-550 per tonne cfr for October shipment, but no deal was closed, according to one source.

In Indonesia, an offer of billet from India was heard at $540 per tonne cfr, but bids were at a maximum of $510 per tonne cfr.

“Indonesian customers stocked up on previous shipments and are waiting for a fall in prices,” a trader said.

CIS
Billet offer prices continued to be high in the CIS, varying in the range of $500-510 per tonne fob Black Sea, with some price indications even reaching $515 per tonne fob.

A cargo of Ukrainian billet was sold in Algeria at $510 per tonne fob Black Sea, according to one market participant.

But besides this single deal, the market was largely quiet during the week, as buyers have shown reduced interest for the material.

Sources started to expect that a downward correction in prices would come, but it remains unclear when that might happen.

“Buyers are more careful about paying such high prices now, unless you offer them with prompt shipment,” a source said.

Egypt, Turkey
In Egypt, billet import offer prices increased this week, but demand was weak, ahead of the Islamic Hajj celebration at the end of August.

An offer of CIS material was heard at $520-525 per tonne cfr, with freight costs estimated at $20 per tonne. However, buyers were bidding only $505 per tonne cfr for the material.

In Turkey, both imported and domestic billet prices continued to rise, as scrap prices remained the main market driver in the country.

Mills in the country offered material at prices as high as $525-530 per tonne ex-works, compared with $500 per tonne ex-works in the previous week, while offers from the CIS region were at $510-520 per tonne cfr.

Bookings of domestic billet in Turkey were reported at $518 per tonne ex-works early last week. On the import side, there was news of a cargo of CIS-origin billet sold at $505 per tonne cfr.

Vlada Novokreshchenova in Dnepr, Jessica Zong in Shanghai, Suresh Nair in Mumbai, Cem Turken in Mugla and Serife Durmus in Bursa contributed to this report.