CIS billet mills peg offers, despite absent demand

The Black Sea billet export market remains in stasis, as buyers are watching Turkish scrap import price development. But with mills' October-casting books almost closed, their offers remain at $420-425/tonne fob Black Sea, with no apparent intention to lower them to achieve sales, trading sources tell Kallanish.

This has led to a stalemate, with no sales of CIS billet concluded in the last week from the Black Sea. Buyers are making enquiries, traders say, but after hearing offers at the same level, they withdraw.

Turkey has also not been heard booking any billet in the last week. Scrap price weakness is anticipated and rebar sales have also slowed a little, as sellers anticipate the new European quota period to open on 1 October. Some traders do not anticipate any activity at all in the CIS billet export segment until 1 October, until buyers have an indication of scrap and rebar price dynamic.

There is also the dampening influence of China's slowdown in billet imports and softer pricing. Although Russian billet producers shipping from Far Eastern ports are still selling to wider Asia, there were no sales to China for over a month, due to lower prices. Southeast Asia does pay $450/t cfr ($410/t fob) but this trade is well balanced with supply from the region, and thus far has no place for ex-Black Sea billet, especially at a minimum of $420/t fob, one trader explains.

China could book at $435/t cfr, but netting back to $395/t fob Black Sea, it is not an option for sellers right now. China's withdrawal from the market on the back of increasing stocks and a deteriorating futures market in the past week are considered as temporary by some sources. They expect the country's billet importers back in the market in early October.

Egypt is stirring, meanwhile, with rising rebar prices and low stocks of billet in ports meaning buyers are watching the market for bookings. Traders say $430/t cfr would work, but considering all the duties and taxes, CIS sellers’ offers need to decline by around $60/t in order to make it work.

Another supplier expects the recovery seen in the European steel market to reflect in steel production, and therefore scrap demand.

An EU-origin scrap exporter, however, says: “No exporter would like to commit to buying at €215-220/t when Turkey is out of the market and clarity is lacking. Besides, euro/dollar parity is strong and very volatile; it could exceed 1.2 anytime. It is time to wait and see.”

An EU-supplier says local mills try to carry as little inventory as possible, so any kind of "…disruption" is likely to cause an immediate reaction, possibly even panic.

Although suppliers point to strong domestic demand, exporters do not accept this justification as material consumed domestically is completely different from that exported. Exporters think Turkey’s price expectation cannot be ignored as it is the largest export destination.

An EU-origin scrap supplier is heard to have sold to Egypt on Friday, though the exact price is yet to be confirmed. Pakistan bought 2,000 tonnes of shredded at $325/t cfr from a European supplier last week. No EU-origin sales have been heard in India recently.

Although there are contrasting thoughts in the market, Kallanish expects EU-origin scrap prices in Turkey to undergo a correction.