Tuesday, January 11,
Black Sea steel billet producers are expected to cut production as scrap costs rise and demand from the construction sector slows. Traders quoted Black Sea free-on-board (fob) billet offers at $660 a tonne, up from sales at around $580-$610 before the festive winter break mainly due to spiraling scrap costs.
But no major sales were done at this higher level, and demand for steel remained sluggish as operations in the construction sector, a major consumer of steel long products, slows during cold weather. Some traders also cut long positions, which helped keep a lid on prices.
“Real demand is not strong, and people are starting to liquidate positions now,” an executive of a major Turkish steelmaker said. “Steel demand had improved in the past few months mainly due to restocking and market players taking long positions.”
Some mills are already talking of production cuts, according to traders. Producers said some mills were already refusing to book new scrap cargoes and were instead buying billet from the CIS cheaper – on offer at $625-635 per tonne cost-and freight (cfr) Turkey this week – to reprocess it into rebar.
Rebar was on offer at $690-700 a tonne fob Turkey, compared with offers at $600 a tonne at the beginning of December.
“Scrap prices are higher than in January 2008, but steel demand is not as high as then,” the producer said referring to the period before the crisis. “I don’t want to take another hit, so I am buying CIS billet instead.”
Expectations of higher raw materials prices were exacerbated by floods in Australia, one of the largest iron ore and coking coal suppliers. Rebar prices rose in China, boosted by higher iron ore prices.
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