CIS exporters of square billet prefer to wait and see instead of yielding to buyer pressure - 21 Jun 11
CIS export market for square billet still sees contradictory sentiments. Exporters in the Azov-Black Sea basin have not yielded to buyer pressure. Most of them stay in a wait-and-see mode like their counterparts in the Caspian region, hoping for the situation to become clearer in near future. Only suppliers at ports of the Far East have managed to increase quotations.
Prices for Turkish square billet have lost $15/t w-o-w. But CIS producers have decided to leave the market instead of cutting prices, contrary to buyers' expectations. Noteworthy, limited amount of July output from the CIS has been allocated for exports, and supply of August production is not expected to increase. This is attributed to the fact that some mills had to cut production of merchant semis in view of planned maintenance in July. Some companies have had more orders moved from July to August, while others started selling August production of square billet in early June already. This suggests that availability of billet will stay limited and suppliers will do whatever it takes to avoid a slump in prices.
Noteworthy, mills set prices for semis at a minimal level of $680/t FOB Azov/Black Sea last week and have not yet announced new offers. So their quotations are just nominal now, at $670-680/t FOB. Only Belarus SW reported at the beginning of the week that it sold 5,000 tonnes of square billet at $678/t Odessa and closed July order book. As previously reported, around 25,000 tonnes of the material was booked by Liepajas Metalurgs at EUR 440/t DAP, as Belarus SW has a long-term contract for monthly semis supplies to this consumer. However, a couple of days later the supplier made a new offer of additional 6,000 tonnes of billet at $691/t FOB. The announced level was ignored, so Belarus SW has had to cut prices by $16/t. Supplier's uncertainty has convinced buyers that its prices may be knocked down, so they intend to bid by another $10-15/t lower, considering that the producer insists on 100% pre-payment.
Market participants report that at the beginning of the week traders sold CIS square billet at around $680/t FOB (to Egypt in particular). However, by the end of the week buyers have been ready to accept $670/t FOB at most.
Decreased prices for Turkish material and the fact that buyers have become careful suggest that next week prices for square billet will fall, but by no more than $10/t.
Further outlook remains vague in the Caspian region: Iranian customers have not resumed purchases, although semis are in demand in the country, thus suppliers have decided to postpone sales of July output. Like last week, only July production from Volga-FEST and REMZ has been offered in the market at $675-680/t FOB Astrakhan, but it has attracted no buyers yet.
The Iranian market has not recovered from the substantial devaluation of the national currency last week. Most re-rollers and stockists who need to restock keep waiting till prices for import semis go down. As a result, traders who have small volumes of June output have had to make reductions, which has brought no results though. At the same time, market operators expect Iranian customers will become more active in the second half of June, which may probably allow foreign suppliers to give just small discounts. However, if buying activity is much higher than expected, which will hardly come true, they will have a chance even to drive offers up.
Having taken benefit from better demand for semis in SE Asia, CIS exporters have strengthened positions ($10/t up in a week) in the Far Eastern market. In particular, EvrazHolding has reportedly succeeded in selling some of July production of semis at $650-655/t FOB Nakhodka.
The fact that Asian sellers (in particular those from South Korea, Taiwan and Malaysia) have abandoned downward policy amid increasing scrap costs in the region and raised square billet offers by $5-10/t in two weeks, also plays into suppliers’ hands. An upturn in demand for longs has undoubtedly spurred buying, as traders having depleted stocks have thought prices touched the bottom and resumed purchases. Thus, steelmakers have got strong support and became able to start booking semis at higher prices.
However, market participants believe an upswing in activity will be short-lived because construction projects are slowing down due to the rainy season, and after Asian buyers book enough material, they will take a wait-and-see approach again.
( Source: www.metalexpert-group.com )