Daily Steel News - 17 Jan 11

Billet prices continue upward spiral in SE AsiaBillet import prices continue to climb in Southeast Asia. New offers for commercial billet from Thai and Malaysian mills are now at $650/tonne fob or $670-680/t cfr within the region, trading sources tell Steel Business Briefing. Thai-origin commercial billet was booked at $650/t cfr Philippines, and grade 60 vanadium-added billet around $670/t cfr Vietnam and Taiwan more than a week ago. One trader reports hearing Asean-origin billet being booked at around $670/t cfr. Others are unable to confirm this but say that such a deal is possible since offer prices are still firm. "Some may accept this price because offers for Russian billet are at $660/t cfr," says a local trader. Asean-origin billet enjoys a 3% import duty advantage, he notes. Similarly, some traders report that Malaysian-origin commercial billet was booked at around $680/t cfr Indonesia, but importers in Indonesia say that this price sounded a little high. “Certain mills are trying to book vanadium-added billet at this price but they were turned down because the supplier was aiming to sell 3sp/ps billet at this price,” an Indonesian re-roller tells SBB. "But scrap prices keep going up," he adds. There is price resistance because domestic rebar prices in the region are not rising as quickly as imported billet prices. “Buying activity is not high because of the gap between prices of buyers and sellers,” a regional trader tells SBB. “But prices will have to meet eventually,” he adds. Buyers are trying to secure cargoes at $650-660/t cfr but there are hardly any sellers at this level.

Iron ore wrap: China import prices continue surgeThe upward momentum in Chinese iron ore import prices gathered pace on Friday as supply from key exporting regions was hampered by adverse weather conditions. Australian fines were traded some $4/dry metric tonne higher than on Thursday, while a large Chinese trader booked a Panamax cargo of 63.5/63% Fe fines from India’s east coast at $187/dmt cfr China for February loading. Offers for 63.5/63% ore reached $190/dmt. The Steel Index (TSI), a subsidiary of Steel Business Briefing, reported that the reference price for 62% Fe iron ore fines jumped $1.8/dmt overnight to reach $178.3/dmt cfr China at the end of last week. Its 58% Fe reference price hit $153.9/dmt, the highest level in the history of the series. After a slow start to the week, iron ore swap prices have rebounded to reflect the strength of prices in the
physical market. At the time of writing brokers reported trades of the Q2 swap at $167.50/t and the February swap at $174/t. Earlier in the week Q2 was trading at $162/t. Steel market sentiment in China remains bullish, with steel futures prices approaching highs last seen in August (see separate story). The performance of steel futures is widely viewed as an indicator of future Chinese iron ore demand, SBB notes.

Coking coal shortage may push up nickel prices: analystRising coking coal prices driven by floods in Australia could cause a huge proportion of the nickel pig iron
industry in China to close down, hence pushing up nickel metal prices, said Citi Investment Research & Analysis in a 14 January report seen by Steel Business Briefing. Citi estimates average Chinese NPI production costs at $15,200/tonne of which coking coal – based on coking coal prices of $170/t – makes up 43%. If coking coal prices were to rise to $300/t, the average NPI cost would jump to $24,000/t, it calculates. Such an increase will make over 25% – or at least 30,000 t/y – of China’s NPI industry uneconomic. Also, given China’s status as a net coking coal importer, the raw material’s availability will be an issue for NPI producers too. Spot coking coal prices have risen above $300/t, with further price rises likely. “With NPI producers being some of the most responsive and price-sensitive producers in the market, we suspect output would fall relatively quickly once these issues start making an impact,” said Citi. China produced around 105,000t of NPI in 2010, of which 45% was produced using coking coal-dependent blast furnaces (the remainder being produced via EAF), according to Citi. The nickel price “could be an unlikely beneficiary of the supply disruptions inflicting the coking coal market,” it said. Nickel prices now look well supported at nine-month highs of $25,000/t and if upcoming nickel projects fail to deliver, “prices closer to $30,000/t are a distinct possibility in 2011,” the report noted.