Daily Steel News - 27 May 01

Billet import market continues to weaken in SE Asia
Billet import prices are down to $540-550/tonne cfr Southeast sia compared to $570-580/t cfr late last week. Several traders are also making offers of commercial material from Ukraine and Turkey at $530-540/t cfr. These traders are said to be short-selling, making offers of billet at low prices to induce bids without cargoes-in-hand. Once they receive bids from buyers, they ask supplying mills to accept these low prices. Traders also report offers at around $550/t cfr. “These offers can do June shipments, so they must be position cargoes,” says a regional trader who saw Russian billet offered at this price. A Thai trader cites an offer for Ukrainian billet at $545-550/t cfr. However, there is very little buying interest for these lower-priced cargoes because of fears that billet prices will continue to fall. Europe’s financial turmoil continues to dent sentiment in Asia and the recent depreciation of Asian currencies against the US dollar has added uncertainties for importers. “Buyers will not book anything unless prices stabilise,” a trader in the Philippines tells Steel Business Briefing. “It will be clearer in mid-June.” Supplying mills will pare output rather than sell at low prices and operate at losses, he believes. A Thai trader says Thai re-rollers need to make their billet bookings because they have not made sufficient bookings since March. An offer of Ukrainian-origin billet at $550/t cfr Indonesia may not be booked however, local traders say. Though due for end-July shipment, after factoring in the 30-day shipment time the cargo will arrive during the Islamic fasting month which commences mid-August – typically a period of slow demand.

Shanghai H-beam prices drop
Shanghai H-beam prices have dropped from mid-May, reflecting the price declines in China’s steel market generally, Steel Business Briefing learns from market sources. Currently, prices for 200x200mm H-beams sourced from Maanshan Iron & Steel (Magang) have declined to about RMB 4,060-4,100/tonne ($595-600/t), with 17% VAT, compared with early May prices of RMB 4,350/t ($637/t). Prices of 400x400mm H-beams, also produced by Magang, are around RMB 4,400-4,450/t ($644-652/t), a significant drop of over RMB 300/t ($44/t) from early May. A Shanghai trader says transactions have improved slightly. But demand remains soft, and he believed that prices might decrease further. “We cannot depend on production costs to predict and analyse where market prices are going – when prices are falling and in an atmosphere of weak market sentiment,” he says. As SBB has reported, Magang will lose about 50,000 tonnes or one-third of its H-beam production this month because of scheduled maintenance. But even this reduction was not sufficient to prevent market
prices from their deep declines. Market sources say the company’s June list prices for H-beams will be cut by RMB 200/t ($29/t) before tax, with 200x200mm and 400x400mm priced at RMB 4,399/t ($644, with VAT) and RMB 4,774/t ($699/t).

Iron ore forward curve firm as spot prices continue to fall
Forward prices for exchange-cleared iron ore swaps have remained firm over the past week in the face of rapidly declining spot prices for the raw material. “Swaps traders think the [spot] market has already, or will very soon, hit the bottom,” a broker tells Steel Business Briefing. “There is also consideration given to the idea that the Q3 contract price will be at around $160/t, and the spot iron ore market is likely to converge with that,” he adds. Meanwhile, other commodity prices have staged a slight recovery, and sentiment in China has improved a little as steel screen and futures prices have firmed slightly, another market watcher points out. The June and July swaps for 62% Fe content iron ore on the Singapore Exchange (SGX) were at $142.75/t and $142.37/t respectively on 26 May, up from $139.20/t and $137.78/t on Monday of last week (17 May), SBB notes. The sentiment is that swap prices are currently relatively fairly valued, sources say, and this has led to some stability in forward prices. However, if the spot price falls below $140/dmt, or if there is any worsening in macroeconomic conditions, this could change, the broker warns. The daily 62% Fe reference price from The Steel Index (a unit of SBB), used exclusively to settle swap contracts on SGX, and also on LCH.Clearnet, slipped to $142.7/dmt cfr China yesterday, down $43.8/dmt from its peak of $186.5/dmt reached on 21 April.