Daily Steel News - 9 Apr 10

Billet prices rise in SE Asia, suppliers hike prices further
Suppliers continue to raise their billet export prices in Southeast Asia. New offers of Taiwanese billet are now $630/tonne fob ($650-660/t cfr SE Asia), up from $620/t fob earlier this week. Certain Malaysian mills
are indicating an export price of $660/t fob ($680-685/t cfr), up from $650/t fob. “If you estimate scrap at $480/t cfr today, the price of billet should be around $630/t fob, assuming conversion cost of $150/t,” a Hong Kong trader tells Steel Business Briefing. Russian-origin billet was recently booked at $615/t cfr Philippines, up from $605/t cfr in late-March. Malaysian billet was also concluded at $645/t cfr Vietnam. A trader’s position cargo of billet, believed to be Taiwanese-origin, was sold earlier this week at $625/t cfr Vietnam. There are a few offers of CIS billet at $660-670/t cfr Indonesia. Brazilian-origin billet was heard offered at $680/t cfr Vietnam. “It is still positive for at least a month,” a regional trader tells SBB. Supply is tight due to the lack of offers, but buying is slow since offer prices are high, he adds. Since rebar prices in regional domestic markets have risen significantly, billet importers can afford to pay more. Indonesian re-rollers raised their bids for imported billet by $20/t from last week to $$630-640/t cfr after increasing domestic rebar prices several times. But there are limits, some traders caution. “Billet offer prices are being hiked more than once in one week,” one tells SBB. Despite rising rebar prices, rebar demand is not strong enough to support such frequent price hikes for billet. “Prices may collapse if billet prices keep shooting up,” he warns.

Korean mills pay more for scrap imports
Korea’s Posco on 7 April booked Japanese scrap at ¥43,900/tonne ($471/t) cfr for both Shindachi and HS grades. The estimated 10,000-tonne purchase will be delivered during this month and next, local trading sources tell Steel Business Briefing. These prices reflect a surge of some ¥3,000/t compared with Posco’s buying price of ¥41,000/t cfr for Shindachi in mid-March. No new booking of H2 grade scrap is heard since the last concluded purchase at ¥38,500/t around two weeks ago. “The Kanto Tetsugen tender will be held on 9 April and the market is expected to come back to book H2 next week,” a Korean trader tells SBB Over a week ago, Hyundai booked two bulk cargoes of US scrap at $455/tonne cfr for HMS No.1 for May deliveries, up from $448/t cfr in mid-March. However, some medium and small-sized Korean mini mills are still monitoring the international scrap market trend. They are adopting a wait-and-see attitude after scrap deliveries from local dealers to these mills’ yards improved recently following a hike in domestic scrap prices, a mini mill source tells SBB. Meanwhile, the country’s total imports of scrap in March rose by 7% month-on-month to 730,000 t, representing the highest level during the past ten months, according to Korea Iron & Steel Association. The US was the largest scrap exporter to Korea, delivering 344,000 t of scrap last month, more than a threefold increase compared with February’s 101,000 t. Japan is the next largest with 251,000 t, but scrap volume from Japan plummeted by 51% m-o-m.

Mills face steep cost increases: not much froth - WSR
Large iron ore price rises and the introduction of quarterly iron ore contracts dominated the markets last week. Details of the new costs to be faced by steel producers are scant: however, rises of 80-130%, depending on the supplier, buyer, quality, freight, volume and duration of the contract, seem likely. In addition, coking coal cost increases of around 55% were confirmed by Posco, and global scrap prices continued to strengthen in many (but not all) parts of the world. These trends left most buyers uncertain. Some responded by buying smaller volumes, adopting a waitand- see approach, fearing offer prices would collapse. Others bought more, fearing prices would rise; both are possible. The cost increases are the immediate cause of the higher finished asking prices. And as many of the new 2010 April-to-June quarter iron ore prices seem pegged to the average of spot prices in January to February, or March, depending on supplier, an immediate collapse seems unlikely. However, the iron ore forward curves are suggesting some softness in the second half of 2010. This would impact prices in October-December 2010 and early 2011. Some mills and a small number of steel buyers are already hedging their purchases - either on an exchange, or an Over the Counter (OTC) market given this uncertainty. A decline in global raw material costs is possible if Beijing seriously cools China’s economy: they would then feed into lower finished steel prices. Alternatively, if China’s steel production continues to grow, requiring more raw material imports, supply bottlenecks may keep coking coal and iron ore prices high, pumping up finished prices further. For mini-mills, where scrap is the main feedstock, scrap pricing seems likely to mirror iron ore price developments: so they will not escape a squeeze on margins.

BHPB settles quarterly iron ore price with ArcelorMittal
ArcelorMittal has settled prices to buy iron ore from BHP Billiton during the April-June quarter, Steel Business Briefing has learned from informed market observers. Both BHPB and ArcelorMittal declined to comment on the matter. Rio Tinto also declined to comment on whether it had settled prices as yet. The agreed price is based on average published prices in January-February for CFR China spot business, adjusted for freight. An independent trader tells SBB that this deal appears to make sense in relation to the quarterly pricing that BHPB has agreed with Asian steelmakers, highlighting the continuing interdependence of the global iron ore market. A number of analysts, both independent and those at investment banks, yesterday confirmed the ArcelorMittal/ BHPB price settlement. Macquarie Bank also quoted Japanese steel industry sources, who indicated that BHPB had now settled with most of its Asian customers at a price of $120.08/tonne fob for 62% Fe fines. One analyst said that the move to quarterly pricing marks the next step in the revolution of iron ore sales, allowing for an increased flexibility in price while retaining a stability not found in LME traded metals with their daily price changes.