GLOBAL BILLET WRAP: Trends mixed as market factors diverge

Price trends in the global billet market diverged in the week ended Friday January 12 because of a number of factors.

In the Asian market the mood turned bearish, following the return of Chinese suppliers to the export market. But sentiment in the Middle East and CIS regions remained largely optimistic, supported by an increase in scrap import prices as well as demand in some member-states of the Gulf Co-operation Council (GCC).

Meanwhile, in North Africa, demand for billet was sluggish because of high stock levels and political instability in some parts of the region.

China, Southeast Asia
Domestic billet prices in China were 3,590 yuan ($552) per tonne at 3pm on January 12, down by 40 yuan per tonne from last Friday due to the lack of demand from re-rollers and plunging prices for finished long steel.

Local rebar prices in Eastern China have dropped by around 30% in a little over a month, from 4,940-4,980 yuan per tonne on December 5 to 3,830-3,900 yuan per tonne on January 11.

A local trader revealed that, this week, Tangshan has around 370,000 tonnes of billet stock, up by 70,000 tonnes from a week ago.

The drop in domestic prices saw Chinese supplies return to the export market, to compete in Asia with cargoes from the Middle East and the CIS.

“The export markets are more lucrative again now that domestic prices have fallen. Mills are now looking for better margins in overseas markets,” a source from Asia told Metal Bulletin.

Offers of China-origin billet were heard at $540 per tonne cfr Southeast Asia early this week, but on January 12 fell to $515-520 per tonne fob – equivalent to $530-535 per tonne cfr, a major trader in East Asia said.

A deal was reported made at $515 per tonne fob this week to a Southeast Asian buyer, but no details were released.

Some buyers are still wary of procuring China-origin billet due to fears of non-performance. “They believe that Chinese mills might back out [of a deal] if prices go up, which happened in 2016,” a trader in East Asia said.

Market sources expect the downtrend to continue, while demand in China remains depressed due to the upcoming Lunar New Year celebrations, as well as the expected rescinding of production cuts in mid-March after the winter heating season.

Meanwhile, CIS- and Middle East-origin cargoes were offered at $540-545 per tonne cfr Southeast Asia last week, with deals done at $535-545 per tonne cfr.

Middle East-North Africa, CIS
Offers of China-origin billet on prompt-shipment terms were heard in the UAE at $550 per tonne cfr last week, according to one source.

This price was considered too high because a regional supplier offered billet for late-January delivery at $545-550 per tonne cfr, with bids coming at $530-535 per tonne cfr.

Buyers were in no hurry to purchase prompt-shipment material and about 20,000 tonnes of March-shipment billet originating from Iran was booked to the UAE at $518 per tonne cfr from traders.

New offers of Iranian billet from mills have already been reported at $520 per tonne fob main ports.

But market participants doubted that any deals were finalized, saying that the market was quiet last week, with buyers assessing the situation.

The workable price was said to vary within the range of $510-515 per tonne fob, with recent deals reported done in East and North Africa in early January around that price.

Nevertheless, sources expected billet prices in GCC countries would rise in the near term amid demand for material in Saudi Arabia.

“Prices will increase,” a market participant said. “Saudi [Arabian] mills are hungry for billet [so] it will be $545-550 per tonne soon.”

Another factor that is expected to support the strengthening of billet prices in the Middle East and related markets is the uptrend in scrap, sources told Metal Bulletin.

Since the beginning of January, Metal Bulletin’s daily index for US-origin scrap has risen by $9 per tonne, to $378.51 on January 11.

However, so far, import offers, from the CIS in particular, have remained largely stable because customers in Turkey, Egypt and Algeria have been holding back from bookings for various reasons.

CIS mills were mainly offering material within the range of $520-525 per tonne fob Black Sea, with separate offers being heard as low as $500 per tonne fob.

In Turkey, CIS-origin material was available at $530-535 per tonne cfr, but customers were willing to pay only $520-525 per tonne, sources said.

“The demand for CIS billet is still weak due to customers’ interest in scrap purchases,” a trading source said.

In Egypt, CIS-origin rebar was on offer at $540-550 per tonne cfr, against $530-535 cfr a week earlier, but no bookings were heard done.

“There [has been] no buying this week. People want to wait and see,” a trader told Metal Bulletin on January 11.

“This week was silent. We prefer to wait as we have high stocks,” another source said.

Neighboring Tunisia was also showing little interest in imported billet amid political unrest in the country due to demonstrations against the government’s austerity measures, which include a rise in fuel prices and taxes on goods.

Some market participants have voiced concerns that the protests may spread into Algeria, leading to a decrease in trading activity to the destination.

Jessica Zong in Shanghai, Paul Lim and Fiona Lam in Singapore, Serife Durmus in Bursa, Cem Turken in Mugla and Felipe Peroni in São Paulo contributed to this report.