Spot offers fall to as low as 9.5 c/lb, downward premium trend expected to continue.
At least two billet suppliers are offering spot billet units at single digit premiums. More in detail, one is a domestic secondary billet producer and the other a trader offering primary billet units from Middle East with an upcharge below 10 c/lb delivered.
However, it is important to note we have not included these offers in our spot billet assessment yet as we have not confirmed transactions at these lower premium levels.
Deep scrap discounts are allowing secondary billet suppliers to be more aggressive, especially as this secondary supplier has struggle to maintain/gain market share when compared to last year.
US off-shore billet imports are at a record high due mainly to strong import levels in January which jumped to 90 kmton, the highest US monthly billet import level ever. Year to date (Jan-mid March), US off-shore billet imports are up 21% y/y to 180 kmton due mainly to higher imports from India, Middle East, Argentina, South Korea and some non-traditional origins like Brazil (which is being sold thru a trader in the US Southeast). Offshore billet imports have been attracted by high MW journalistic premiums and billet upcharges, which offer the best netbacks for almost all major billet suppliers worldwide.
On the spot premium side, we expect US spot billet premiums to continue under bearish pressure as market oversupply lingers, considering: a) US sanctions against UC Rusal have been lifted (reducing uncertainty and increasing availability in US spot market), b) US offshore imports are strengthening to new highs, c) various offshore billet expansions are coming online this year (with units directed to the US as it’s the most attractive market), and d) an abundance of scrap at deep discounts are allowing secondaries to lower spot premiums if needed to compete since their margins are healthy.
HARBOR’s spot US billet premiums delivered for 6063 alloy billet logs (7-9-inch diameter) National Range stands at 10.0-13.0 cent/lb.
Specifically, HARBOR’s US billet spot upcharge delivered for well-known/traditional suppliers stands at 11.0-13.0 cent/lb. Well known/traditional suppliers include: 1) primary producers such as EGA, RTA, Century, Alcoa, Rusal, Alba, Aluar, Qatalum, and Hydro Norway and 2) secondary producers such as Matalco, Ohio Valley, and Hydro.
Likewise, HARBOR’s US billet spot upcharge delivered for nontraditional suppliers stands at 10.0-12.5 cent/lb, but with confirmed offers are already taking place around 9.5 c/lb.