Global billet prices, under pressure from finished longs prices, have undergone a harrowing phase over the past 2 months. The meltdown started with the vanishing act of Turkish buyers from scrap and billet market around mid April.
Although the correction was always on the cards with prices having inflated to spectacular levels of USD 630 per tonne FOB Black Sea, the magnitude of purging has shattered the sentiments into smithereens. A 29% climb down has not only astound everybody it has left mills groping in the dark for reasons leave alone revival.
With the lack of demand and uncertainty, even notices that prices for billets have already crossed break even point are not clarifying further market movements. As per our sources, most of the producers are offering billets in range of USD 440 per tonne to USD 450 per tonne FOB Black Sea, but buyers are bidding at USD 420 per tonne to USD 430 per tonne. BTW quotations to Asian markets seem to be higher with Caspian Sea levels for Iran are still proposed at USD 480 per tonne to USD 490 per tonne with Iranian buyers in wait and watch mode and to Asian destinations at about USD 500 per tonne but without any demand at this level.
In this parched market identifying reasons is easy. Apart from the crash in scrap prices, crash in Chinese domestic levels, emergence European economic crisis the seeds of negativism were sown. The embryonic revival in billet prices witnessed in the first quarter of 2010 crumbled in no time exposing its fragile fundamentals.
Meantime, finished longs went down to 500-520USD/t in general. Rebars are offered at 490-520USD/t; WR at 510-540USD/t.
The shudders of dwindling prices can be felt 3 months hence in the futures market when the prices of Mediterranean billet futures contract on the London Metal Exchange fell to its lowest level this year. The three month price was USD 395 per tonne to USD 405 per tonne on 15th June. This is down by USD 30 per tonne from USD 425 per tonne to USD 435 per tonne (3M) and USD 424 per tonne to USD 425 per tonne (cash) at the same time last week.
Lack of liquidity and devastated Chinese market has hardly any boding of an early revival. Moreover with European crisis having all the forebodings of a pandemic and ever diminishing Euro has left no speck of doubt about prolonged depression.
Most of the mills have been scurrying for shelter by cutting down on production to the tune of 30%.
One can hope for baptism with the impending return of Turkish buyers in scrap market thereby infusing some life. Moreover with Ramadan round the corner it might just be possible that there is some revival in 2nd Week July.