Steel billet prices held firm in the Black Sea market this week on the back of rising scrap prices and as merchants aimed to replenish their stocks before an expected slowdown in demand for Ramadan kicks in.
Economic activity in the Middle East, a major consumer in the Black Sea, Turkish and CIS billet market, tends to slow during the Muslims' holy month, which is due to start towards mid-August this year.
Traders say inventory levels are not very high and there is some tightness in the market as Russian and Ukrainian mills keep production at lower levels after demand has already started to slow since April, giving them the upper hand to push up prices.
Traders said mills were offering Black Sea free-on-board (fob) billet at around $510-520 a tonne, almost unchanged from last week, while the price of scrap rose to $365 a tonne from last week's $340-350 a tonne.
"Scrap prices have gone up this week, and mills did not hesitate to raise the prices," said a UK-based steel trader.
Scrap is a key ingredient used by producers with electric arc furnaces (EAC) in the making of billet, a form of long steel used in construction.
On the London Metal Exchange, three-month Mediterranean billet FMD3=LX, now the exchange's benchmark contract, traded at $495 a tonne, its highest since mid-May and up from $470 a tonne last Friday.
"I'm not sure how sustainable these prices are with Ramadan looming and things slowing down. Once they digest the new scrap price, I would think the offers would come down," the trader said.