LONDON, July 23 (Reuters) - Steel billet prices in the Black Sea and Turkish market gained ground this week, as scrap prices climbed higher and merchants returned after depleting their stocks.
Traders said mills were offering Black Sea free-on-board (FOB) billet at around $510-520 a tonne, compared with $480-495 a tonne last week. The price of scrap, a key ingredient in the making of billet, rose to $340-350 a tonne from around $330 a tonne last week.
On the London Metal Exchange, three-month Mediterranean billet FMD3=LX traded at $470 a tonne, its highest since May 14 and compared with $445 a tonne last Friday.
"(The rise) is mainly due to the fact that scrap prices have gone up," a Turkey-based trader said. "There were a couple of big scrap purchases in Turkey, which has given the scrap dealers the upper hand in pricing," he said.
Scrap is the key ingredient in the making of billet, a form of long steel used in construction. Scrap is used by producers with electric arc furnaces (EAC).
Rising prices of steelmaking raw materials such as scrap and iron ore has been the major driver behind the rise in steel prices this year, which have gained from just below $400 a tonne in early February to $655 a tonne in April.
At the time, spot iron ore prices were IO62-CNI=SI at a peak near $200 a tonne. They have fallen over 30 percent since then.
NO STOCKS LEFT
Traders also said there was some decent buying from merchants, who have been selling from their inventories and now had to come back to the market to replenish them. Buying was mostly coming from the Middle East and North Africa.
"Merchants are now in a position where they have to buy what they sell to their consumers, there are no stocks," another Turkey-based trader said. "So we have demand equal to the real consumption, but I don''t see anyone building stocks," he said.
The market was still jittery, he added, and hence traders refrained from accumulating stocks as cloudy economic growth outlook in the United States as well as Europe and signs of slowdown in China raised uncertainty. [ID:nTOE66D06L]
But this week in China, steel prices started rising after slumping for the past three months even though mills and traders are unsure about the sustainability of the climb. [STL/]
"Now we have Ramadan ahead, when it will be rather quiet. Everyone''s looking beyond September and asking themselves the same question: ''Will it rebound after September?''," the trader said.Economic activity tends to slow down in the Middle East and North Africa region during the Muslim holy month, which this year begins towards mid-August.For the corporates, the outlook for the latter part of the year does not look rosy.
Global leader ArcelorMittal (ISPA.AS: Quote) and other European steelmakers will reap rewards in the second quarter from continued re-stocking, auto demand and higher prices, but that may be as good as it gets. [ID:nLDE66E11F]