For those that follow the new LME Billet contract, or those that want to once we launch our new premium service, MetalMiner IndX (SM) which daily tracks this and many other metals, there has been a telling development in the prices over the last week few weeks or so. Amid continuous reports of rising steel costs, prices for Mediterranean and Far East delivery have steadily declined since a late June high of over $1250/ton. Yesterday’s close for a 3 month buyer was $1085/ton, down some 14% from the peak. The Far East price closed at US$ 960/ton, the first time it has been below $1000 since May shortly after it was launched. Billet is used to make long products particularly reinforcing bar in the Middle East. SBB also reports that Asian scrap prices are softening and we ask the question is this the first sign of a drop off in construction activity? Certainly southern Europe has seen a decline in the construction market for the last 2-3 months and rebar production has been re-directed to the busy Middle East market. Is the decline in Middle East prices an indication of over supply or slowing activity? Domestic Chinese billet prices have eased over the last week and at $ 200/ton under the LME, the Far East price suggests any excess capacity can be exported in spite of export taxes. The Middle East is entering its seasonal quiet period so it may be too early to call. Certainly iron ore, coke and energy costs will underpin the market, but we still see demand softening and would not be surprised to see the Middle East price approach $1000/ton and the Far East drift downwards towards $900/ton as the summer progresses.
Watch this space.