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Southeast Asia buyers shun Iranian steel billet after latest US sanctions

Singapore β€” Major buyers of steel billet in Thailand and Indonesia are avoiding Iranian material, choosing instead to source from Russia, Vietnam and Malaysia, following the latest US sanctions on Iran's metals sector, market participants told S&P Global Platts this week.

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The shift in purchasing patterns has caused offers for Russian billet to rise by about $10/mt, or 2% over the past two weeks to $460-$465/mt CFR Southeast Asia.

The latest deal done for up to 50,000 mt of Russian material took place at $445/mt CFR Manila last week, a $5/mt increase over another deal done earlier, market participants told Platts. Buying indications for Vietnamese and Malaysian material this week were at $455-$460/mt this week, although they were for smaller shipments of 10,000-20,000 mt.

Current deliveries to Thailand and Indonesia were still taking place for material contracted prior to the latest US sanctions, sources said, although buyers were cautious about placing new orders.

"We have ceased new purchases of Iran-origin billet this month," said an Indonesian mill source. "We don't want to take the risk in case delivery fails, as it will affect our production schedule and cause big losses to the company."

A separate source at a Thai mill said besides other sources like Russia, Vietnam and Malaysia, the company was also considering to melt more scrap to fill in the gap in raw material supply.

"Major buyers in Thailand and Indonesia are pulling back from [buying] Iranian billet for fear that the US might also place sanctions [on them]," a Singapore-based trader said.

A deal for 80,000 mt of Iranian billet was heard concluded during the week of May 13 at $420/mt CFR Thailand, suggesting that not all buyers have completely shunned Iranian material.

Prior to the latest US sanctions, many buyers have avoided importing Iranian steel mainly because of concerns over their credit lines at banks and due to the inconvenience of having to transact in currencies other than the US dollar.

Iran, the world's tenth largest crude steel producer by volume according to the World Steel Association, has seen output at 8.4 million mt in the first four months of 2019 rise 6% year on year.

Over Iran's last fiscal year which ended March 20, 2019, semi-finished steel exports reached 4.9 million mt, down 29% from the previous fiscal year, Iranian Steel Producers Association data showed.

Shipments of billet and bloom accounted for 3.3 million mt, or 67% of the total exports, down by 18% on the year, while slab exports comprised 1.6 million mt, or 33% of exports, down 44% on the year.

The top export destinations for Iranian semi-finished steel were Thailand, Indonesia, the UAE, Egypt and Oman, according to the US Department of Commerce.

-- Samuel Chin and Staff, newsdesk@spglobal.com

-- Edited by Nurul Darni, newsdesk@spglobal.com