Daily Steel News - 9 Feb 11

SBB Prices & Indexes
World price +/-
World HRC $/t 812 +39
World Rebar $/t 766 +25
Malaysia Rebar $/t 790

Billet import market in SE Asia awaits clarity
The billet import market in Southeast Asia is proving slow to pick up after the Chinese New Year holidays. “The market is still in a holiday mood,” a regional trader said this week. Import offers are very limited, trading and importing sources tell Steel Business Briefing. In the Philippines, a trader’s position cargo of Russian billet was booked at $655/tonne cfr two weeks ago. Korean material, which enjoys a 3% import duty advantage, is offered at $685/t cfr. “The biggest problem is that rebar prices cannot catch up with the replacement cost of billet. Re-rollers are becoming increasingly better off buying the finished product,” a Manila-based trader tells SBB. “Many rerollers are themselves buying debar instead of billet because the local selling price of Grade 33 debar is even cheaper than the landed cost of a billet imported at $660 cfr,” another says. Malaysian and Thai mills were giving export offers at $680-690/t fob and bookings were heard at $680/t fob to the Middle East. Malaysian-origin billet was booked at $685/t cfr Indonesia.
”We are taking time to assess the market,” says another source. The situation in the Middle East has caused some confusion, with both low and high prices heard in the market. He believes that market players will hold back for the next two weeks because prices have gone up and are now soft. “The market will want to see whether China holds up strongly," he tells SBB. "It's very quiet. People want to see the direction of the market," a Thai trader observes, watching whether the political unrest in Egypt and Tunisia will affect the global steel market. A position cargo of Ukrainianorigin billet was heard booked last week at $660/t cfr Thailand.

Brazil's iron ore exports decline in already tight market
A significant reduction in Brazil's January iron ore exports has increased pressure on an already undersupplied market, Steel Business Briefing learns from Macquarie commodities analysts, who believe the scenario will remain tight throughout the first half of 2011. The "calamitous" 20% month-on-month drop seen in January was somewhat related to the annual rainy season. However, sources tell SBB logistical issues have been a major factor in curtailing exports, as well. "A derailment in rain-afflicted Rio de Janeiro state cut supply to Guaiba port, while damage at the Tubarão terminal caused a huge drop in shipments," Macquarie says. "These difficulties have led to a record level of
port congestion outside Brazilian ore ports (over 10m tonnes), as cargoes were simply not available to load on schedule." Brazilian exports to China declined 23% m-o-m, with other drops also registered in Europe, Japan and Taiwan. The 27.1m t exported last month "highlight that port stockpiles were not sufficient to cope with the shortfall in railings, suggesting a reasonable part of (the) Q4 export boost was destocking." As previously reported, top domestic producer Vale said its iron ore output/exports weren't considerably affected by Brazil's rainfall, but a more significant loss was experienced in Australia, with disruptions of 500,000 t of iron ore and 600,000 t of coal. Market participants believe prices will remain high, driven by a tight offer scenario in the near term. SBB notes the January 2011 drop in exports was the worst in the past five years – surpassing the 18% decline seen in 2008.

Rotterdam FOB scrap prices slide as Turks step away
North European scrap traders say the export market is too quiet to call. The region’s key buyer, Turkey, needs to wait and see what will happen in the Middle East, including Egypt, and is trying to push prices down, sources say. On Friday 4 February, EU offers fell “another $10/tonne” to $475/t cfr for HMS 1&2 80:20, SBB's sources say. This week, the Turkish mills are still not interested despite reports out of Belgium that “HMS 1&2 70:30 is being shown very aggressively at $465/tonne cif”. It may be that this offer is being overplayed to put downward pressure on the market, warns a UK trader. It may be that this offer is being overplayed to put downward pressure on the market, warns a UK trader. But other exporters note lower numbers. “I wouldn’t like doing $460/t cfr [Turkey], but it would be OK,” one trader tells Steel Business Briefing. This equates to $435/t fob Rotterdam, he adds, compared to the peak over three weeks ago when fob levels were up to $495/t. Turkey’s lack of interest can be summed up as follows, a source notes: “If pressed, they’ll bid $425/t cfr. That’s way too low. They’re not serious.” However, other traders are more optimistic. On the demand-side, Asia will be waking up after the New Year celebrations, and on the supply-side, the blizzards could hamper scrap exports out of North America, a German source says. There have been no known contracts out of northwest Europe to Turkey since late January, when a mixed HMS cargo sold from Sweden at $497/t cfr, adds a trader. With freight at over $25/t, the fob equivalent was around $470/t, he notes.