The CIS billet market has been supported by Iran exiting the Gulf Co-operation Council (GCC) region after US sanctions were applied in August 2018, Arabian Gulf Steel Industries chief commercial officer Deepak Bhandari said at the 8th MENA billet and flats conference in Beirut today.
Iran accounted for around 44pc of the GCC region's billet imports in the first half of 2018, with 537,000t. But trade data show the region imported only 6t of billet from Iran in the first half of this year.
CIS steps up
The displaced capacity was taken up by the CIS region and domestic suppliers.
The region was able to increase its market share considerably, to 370,000t of billet exports into the GCC region in the first half of 2019 from just 53,000t a year earlier.
This decline occurred despite the considerable increase in the price spread between CIS and Iranian billet. The Argus daily Black Sea steel billet assessment on 28 August was $393.30/t fob, while Iranian bid-offer indications stood at around $377.50/t fob — $15.80/t lower.
But prior to the sanctions being applied, indications for Iranian billet were higher than CIS material, at $498/t fob on 19 June 2018. On the same day, the Argus daily Black Sea steel billet assessment stood at $418/t fob.
Increasing competition
Billet prices globally have been sliding recently because of the surplus of steel production.
Flat internal economies have driven some countries, such as Turkey and India, to increasingly turn to the export market, particularly for billet.
India is ramping up steel production, with the government targeting output of 300mn t of crude steel by 2031, based on rapid industrialisation. But it has recently experienced an economic slowdown that has hit the steelmaking industry hard, driving it to export. India exported 2.4mn t of billet in 2018, compared with 746,246t in 2015, trade data show.
India can offer billet at competitive prices with CIS and is currently offering aggressively into south east Asia, particularly Myanmar, market participants said.
Iran re-routes
South east Asia is still accepting Iranian material, and Iran is ramping up exports.
Thanks to access to cheap natural gas and iron ore pellet, Iran is able to use the direct reduced iron (DRI) method to produce very low-cost steel.
Iran exported 3.9mn t of steel billet in 2018, compared with just over 1mn t in 2015. Iran plans to boost steel output to 55mn t/yr by 2025, of which 10-15mn t is earmarked for export, Bhandari said. South east Asian countries imported 16mn t of steel products in 2018.
If Iran can corner the south east Asian market, the main focus for India will naturally be GCC. Offers were heard today from India to the GCC region at $390/t fob, which equates to around $415/t cfr. The Argus Black Sea steel billet assessment is $370/t fob, with freight to GCC coming in at around $40-45/t. Because India can offer at competitive prices and with faster shipment, there is a danger that it will crowd the CIS out of the GCC market.
Russian domestic activity
High demand from Russian construction activity has also supported CIS billet prices in recent months. And CIS producers are still able to achieve sales in the domestic market despite falling prices.
Russian domestic values for A500C grade 12mm diameter rebar were set by mills at 37,000-38,000 roubles/t ($556–571/t) cpt Moscow for September, much higher than CIS export prices. The Argus weekly steel rebar assessment stood at $430/t fob this week. But as the winter months approach, this market will also close off CIS sellers.
