Black Sea billet prices fell this week and are expected to fall further as demand shrinks on concerns about the health of the global economy and as tighter credit conditions cut investment in construction, a key billet consuming sector.
Traders quoted Black Sea billet offers at $640-660 a tonne free-on-board (fob) Russia and Ukraine, compared with $660-675 last week.
"The market is bearish; I am bearish," a UK-based billet trader said. "I think we are going to get a fairly substantial correction," he added.
"So we are going to have a difficult time unless the Fed starts pumping money out or the Chinese start spending again."
The Federal Reserve on Wednesday cut its forecasts for US economic growth, but offered no hint of further monetary support, saying growth should pick up soon.
Steel billet demand generally peaks in the spring as construction activity speeds up but the uncertain macroeconomic situation was weighing on steel demand, which was depressed both in the Middle East and Asia, two of the major import markets.
Egyptian buyers were among the few still in the market for steel billet but were not ready to accept the current offer prices, trader said.
As Ramadan approaches demand is expected to slow down further in the Middle-East.
Workers in Muslim countries will be fasting during the religious festivity and this, coupled with hot weather, will slow down construction in Northern Africa and the Middle East.
Demand from China and Turkey was also sluggish."The Turkish domestic market had a boom in May and after the election people stopped buying," said a second billet trader."I think they had indigestion."
Turkey's ruling AK Party leader, Tayyip Erdogan, was elected for his third term as prime minister earlier this month.
Turkish billet was on offer at $650-670 per tonne fob Turkey from $670-690 per tonne last week.
Turkish rebar a finished steel long product fell to $715-720 per tonne fob from $725-735 last week.
"The Turkish are not in a rush to sell as they have got long lead times but I think by the end of next week prices will be coming under pressure," the second trader said.
Prices for scrap, a key long steel products ingredient, fell to $465-470 per tonne cost-and-freight Turkey, around $10 down from last week.
On the London Metal Exchange, the benchmark billet contract was at $550-563 a tonne bid/ask spread, from a close at $558 a tonne last Friday.