GLOBAL BILLET WRAP: Prices start falling led by China, raw materials

Steel billet prices fell in China and other markets last week, and buyers are refraining from closing deals as they wait for a definitive direction.

Last week ended with a crash in Turkey’s scrap market and a sharp drop in Chinese billet prices, leading market participants to expect future corrections in most markets.

Signs of oversupply in the Turkish scrap market allowed mills to reduce import prices of the raw material.

The Metal Bulletin’s daily ferrous scrap index for North Europe-origin HMS 1&2 (80:20) fell to $315.72 cfr Turkey on Friday, from $339.18 a week earlier.

In China, a correction in steel futures and billet spot prices late last week also contributed to the declining sentiment.

Other commodities were also affected by weaker demand from China, and Metal Bulletin’s 62% Fe Iron Ore index fell to $63.56 per tonne cfr Qingdao on Friday, while Metal Bulletin’s cfr China Premium Hard Coking Coal Index ended the week below $200 per tonne.

Billet prices in China’s northern Tangshan region dropped by 100 yuan ($15) per tonne last week, to 3,620 yuan ($549) per tonne at 3pm on Friday.

And late on Friday, Chinese billet prices plunged another 100 yuan, reaching 3,520 yuan per tonne.

Weak trading activity and sellers’ bearish sentiment were behind the price corrections, according to sources.

Billet prices were largely stable most of the week, and the drop started late on Thursday, after a decrease in the futures markets.

As buying interest faded, sellers made price cuts in the rebar market in an effort to book orders.

The decrease was felt in the rebar market as well. In north China, prices fell by 180-190 yuan per tonne last Friday, compared with the previous week. The weakness in the domestic market led steel mills to turn eagerly to exports.

Currently, domestic billet prices are equivalent to an export price of around $505 per tonne fob, market participants said, but no export offers from China were confirmed.

Also, a seven-day national holiday in China, set to begin on October 1, is affecting steel supplies, according to market participants.

“[Chinese suppliers] are cashing on or unloading what they have in their hands,” a source in Southeast Asia said.

Southeast Asia
After rising for several weeks, offers of billet in Southeast Asia started to soften late last week, mainly as a result of a downtrend in China and the weakening in iron ore and scrap prices.

Offers for the material were heard at $540-545 per tonne cfr, including material from India, Russia, and eventually China.

Bids from Indonesia, Thailand and the Philippines were heard at $540-542 on Wednesday. But by the end of the week, customers in the Philippines had reduced their bids to $535-537 per tonne cfr.

The large volume of inventories built by traders in Southeast Asia in recent months was another reason for declining prices, as some of this material is being sold at lower prices.

“In Indonesia, the market for finished steel products, such as wire rod, is not so good,” a source said. “Buyers still have inventories until the end of the year and they have decided to wait,” the source added.

In India, mills have reduced their volumes of billet for export, due to the declining international prices.

CIS, Middle East and North Africa
In the CIS region, prices have also started to roll back following the same trend seen in other regions.

Offers from CIS mills were heard within the range of $525-535 per tonne fob Black Sea, against $530-540 per tonne fob last week.

There were unconfirmed rumours of offers from Russian mills at close to $520 per tonne fob.

Buying activity was kept to a minimum, as customers expected further price drops.

CIS producers and market players were also waiting to hear from the International Rebar Exporters & Producers Assn (Irepas) conference on September 24-26, expecting clues about which direction the market would take.

In Egypt, currently one of the largest buying markets for CIS material, a source said prices were expected to reach $500 per tonne fob this week.

A cargo of CIS billet was heard sold to the country at $525 per tonne cfr, which is equivalent to $505 per tonne fob Black Sea.

The Egyptian government was planning to remove duties for rebar from Turkey, Ukraine and China, according to a source.

Rebar duties in the country were one of the reasons that spurred demand for billet imports in the last couple of months.

In Turkey, offers from the CIS were heard at $535-550 per tonne cfr, while buyers were willing to pay a maximum $530 per tonne cfr.

Steel producers in Turkey have been also raising billet prices, but producers and buyers were in the sidelines after the adjustments in scrap prices.

Metal Bulletin’s weekly price assessment for domestic billet in Turkey was also flat week-on-week at $530-540 per tonne ex-works.

In the UAE, offers from Iran have been reported at $515-520 per tonne fob during the week, roughly stable from the previous week.

Vlada Novokreshchenova in Dnepr, Jessica Zong in Shanghai, Cem Turkem in Mugla and Suresh Nair in Mumbay contributed to this report.

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