Middle East Billet Industry Faces Economic Struggles Amidst Sluggish Demand

The Fall in Billet Prices and Rising Operational Costs

Bids for commercial billets in the Gulf Council countries have faced a notable reduction, dropping by \(11/t to reach \)449/t CFR as of mid-April. Compounded by the weakening demand for steel, producers in Saudi Arabia are compelled to sell billets at \(520/t EXW, despite a breakeven level of \)533/t EXW.

In southern Europe, billet costs also saw a decline, with prices dropping by €3/t by mid-April. This mirrors trends in the Gulf Council countries, driven by slackening rebar prices and declining purchase orders from re-rollers, as stated in GMK Center.

A Complex Situation for Global Markets

The ripple effects of these challenges stretch far, affecting regions like China, where steel billet prices shed $11/t earlier this month. Inventory levels in places such as Tangshan dropped significantly, providing tentative grounds for price support in upcoming weeks.

However, the mounting inventory of rebar underscores a tepid demand for finished steel products. To mitigate losses, Middle East mills are increasingly turning towards imports from Southeast Asia, tapping into shipments from China and Indonesia.

Electricity Tariff Increases in Oman and Their Impact

In Oman, with a 33% hike in electricity tariffs during peak hours, production strategies are being reassessed until this high tariff concludes in July. It was initially speculated that these rates may hike rebar costs, thus benefiting billet prices, but the overarching weak demand thwarts such expectations.

Turkey’s Response Amid Declining Demand

Turkey’s billet producers have witnessed a similar scenario, dropping prices by \(10/t to \)520/t EXW amidst subdued requests from construction sectors. The preference also leans towards imports from Southeast Asia as local producers hold out for further price interventions.

Future Outlook: Will Demand Revive?

Despite the bleak outlook, producers refrain from halting operations completely, hoping for an upturn. The evolving economic landscape requires a meticulous balance between conserving resources and preparing for potential market rebounds, a scenario that continues to challenge the Middle East’s billet industry.