CIS billet prices have risen again in the past week as several traders and reportedly end-users booked various lots of Russian and Ukrainian material, practically closing suppliers' January allocations.
The latest concluded deals of billet range from $405/tonne fob for Ukrainian material to a reported $420/t fob Black Sea for a Russian scrap-based and likely special chemistry prompt-shipment small lot. The latest offer indications from this coastal mill have risen to $430/t fob, according to traders. This supplier also sold several small lots at $405-410/t fob in the last ten days. A Russian vertically-integrated supplier sold a medium-sized lot to a trader at $407/t fob.
At $405-410/t fob, CIS billet prices are comfortably low compared to Turkish premium HMS 1&2 80:20 scrap prices. But they are too high in relation to rebar transaction prices at $430-440/t fob Turkey and $415-420/t fob for CIS material. This implies the market is unbalanced and driven by scrap prices and traders' deals.
Billet prices – evidently cost-pushed – have no uptake in several key destinations in North Africa. Moreover, plenty of alternative billet is on offer. North African demand for scrap, however, is high due to local billet/rebar production needs, but regional rebar demand is weak.
"Indian billet is at $405/t fob, Vietnam is ready to sell large volumes at $405/t fob, and there is also Iran, which, granted, has geographical acceptance limitations. But re-rollers are still only willing to pay $420/t cfr in Tunisia, and Egypt is out, while you cannot sell at these prices to Southeast Asia anymore, as prices do not exceed $440/t cfr there, and demand has subsided, as Chinese domestic prices are softening too," a seasoned trader tells Kallanish.
Scrap demand from new rebar mills exceeds availability and is pushing up scrap prices, while preventing rebar prices from rising due to abundant rebar supply and poor economic climate. This is producing the billet price volatility, traders note.
Meanwhile, ongoing trade wars and extended negotiations between the US and China are delaying recovery in end-use sectors that have the capacity to support and push up rebar prices. Near zero margin between billet and rebar price in Turkey is just one example of the unbalanced dynamic. There are others, such as mills in North Africa offering their obsolete scrap to traders for export, as they do when they sense the price is about to peak and start descending, they add.
Based on real demand, rebar prices and some CIS mills’ extremely short lead times, some traders place CIS billet’s "…real" value at $390/t fob today. Admittedly, should China and the US finally agree a trade deal, the growth will become sustainable as finished long products' prices will start rising fast, with a myriad of frozen construction projects coming back on line.