LONDON, Aug 13 - Steel billet prices in the Black Sea region and in Turkey have continued to edge up this week, on the back of higher scrap prices, but a summer lull, coupled with the start of Ramadan, meant fewer deals were done.
Traders said mills were offering Black Sea free-on-board billet at around $530 a tonne, compared with $510-520 two weeks ago. Meanwhile the price of scrap, key ingredient in the making of billet, surged to $390 a tonne from around $350.
According to Steel Business Briefing data, Turkey import prices for billet were up at $526.25 a tonne, from last week's $504.17 a tonne.
"Mills keep putting the price higher...there seems to be a bit of a shortage in billet," a UK-based steel trader said.
"Mills use whatever opportunity they can to push the price higher. At the moment, scrap is going up, so that gives them a reason," he added.
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 .
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.
"The price rise at the moment is not so much one driven by the demand, but more by the cost," a U.S.-based steel trader said, adding that there was some buying from the Middle East and he saw decent demand in the Turkish domestic market.
"The demand for semi-finished products is higher, but for end-products such as wire rod, rebar is still relatively weak," he said.
Analysts say the expectation is that prices will rebound after September, when Ramadan, the Muslim holy month when the economic activity tends to slow, is over.
Germany's largest steelmaker Thyssenkrupp echoed traders and lifted its outlook but also warned against volatile raw material prices, like its rival Salzgitter which reported results this week as well.
Thyssenkrupp also cited slowing growth in China, the world's top steel producer and consumer, which this week posted slower factory output. Steel prices on the Chinese domestic market rose slightly this week, supported by more expensive iron ore and expectations that major mills will raise prices in September.
Demand from end users has yet to radically improve, but Baosteel China's second largest steel mill, is still expected to raise prices for September orders after cutting prices for July and August.
"Many in the market are betting on a price rise in September. If that doesn't come through, we could see a major plunge in the market," a third trader said.
On the London Metal Exchange, three-month billet contract traded at $500 a tonne, falling from a three-month high of $513 a tonne struck on Wednesday. It was almost unchanged from last Thursday's $505 a tonne.