CIS billet: Canada tests export market

As steel demand remains tepid in most markets, Canada is the latest country to offer steel billet on the export markets, which is bound to pressure price levels further.

The Argus daily Black Sea steel billet assessment slipped by $3.50/t today to $353.50/t fob.

CIS mills have been heard to increase offers for long products as the market picked up steam. But the threat of new material on to the export market looms large and questions remain over the scale of demand that exists.

Offers were heard in the range of $355-365/t fob today but few CIS mills are on the market. The highest bid heard was $372/t cfr north Africa, which nets back to about $347/t fob Black Sea.

Typically, billet prices increase in the fourth quarter of the year as the winter season makes scrap collection more difficult. But tepid demand at this point in the year, combined with new markets entering the fray, means fundamentals look bleak for steel markets.

Canada was heard to have offered export billet to a trading firm. Typically, Canada sells minimal amounts of semi-finished steel on the export market, but in the past few months it has increased its exports, mainly to the US. In June and July, it exported 30,318t and 18,382t, respectively, to the US, compared with 3,483t and 1,198t in June and July 2018. In August, it sent 32,022t to the US, as well as 20,000t to Peru, suggesting Latin America could be a target market for Canadian steel exports.

But Brazil is thought to have at least 100,000t of billet that it is ready to sell on the export market for December delivery, with the most likely destination Latin America or Asia. Brazil would need to sell higher tonnages to make freight outside of the Americas workable, a trading firm said.

But demand has also decreased in Latin America, and if Canada and Brazil are both fighting for market share, desperation could drive more cargoes to the Asia-Pacific markets.

The Gulf Cooperation Council (GCC) region remains weak, and CIS offer levels are far too high for this market today, one buyer said. GCC mills are already offering export billet because of a saturated local market, and Qatar, India and Iran are all pricing aggressively. At least 50,000t of Iranian billet was sold this week on the export market, and offers are now at $345-350/t fob Bandar Abbas for November delivery.

With the US applying tariffs and the threat of EU sanctions looming, as well as an increasing number of global protectionist measures targeted at Turkey, its export prices will need to be slashed, one mill said. This is likely to drag down CIS prices as it struggles to compete.

"Sentiment alone is enough to tear down prices," the buyer said. "Whatever chance there was of an uptick in prices is now gone."