2017 REVIEW: Brazilian slab export prices turbulent but optimism remains

Export prices for Brazil-origin slabs have fluctuated by around $130 per tonne this year, influenced by raw materials, finished steel prices in Asia and even billet.

After starting the year above $400 per tonne fob, slab export prices from Brazilian producers reached a bottom at $380 per tonne fob in mid-2017, only to recover to $510 per tonne fob in September.

On Friday December 15, Metal Bulletin’s weekly assessment of exported Brazilian slab was $470-480 per tonne fob.

While raw material prices were the main driver in the slab market in early 2017, other factors such as China’s steel production and even billet availability were also behind the volatility in slab.

Coal effect
Slab prices in the CIS region and Southeast Asia were decreasing in early 2017 as coking coal faced corrections from previous historical high level.

A correction in coking coal prices, which had reached a historical high the previous year, was the strongest influence in slab in early 2017.

But Brazilian slab exporters saw prices peak at $430-440 per tonne fob in January, with demand for material in the country sustained by buying activity in the United States and Europe.

By then, world slab markets were facing pressure from low Turkish bids and strong competition from Iran, which eventually forced Brazilian producers to accept lower bids.

But coal prices rose again in mid-April, reaching levels of around $300 per tonne fob Australia again as production and logistics in the country were affected by Cyclone Debbie in late March.

Competition increases
The effect of the disaster in coal prices provided extra support to slab until mid-April, with prices of the raw material moving back to around $200 per tonne fob Australia.

At the same time, iron ore prices also weakened and prices for Chinese hot-rolled coil (HRC) and heavy plate had a sudden drop in April before starting a slow recovery.

This led slab prices to drop further during May and June.

Meanwhile, tough competition between Ukrainian and Brazilian mills put even further pressure on semi-finished product.

On top of that low-priced offers from Iran, which tumbled as low as $370 per tonne fob, made it more difficult for Brazilian mills to compete, especially in Asia.

The downtrend continued until July, when the ongoing recovery in flat steel prices in China finally had an effect on the slab market.

As prices in China showed strength for several weeks in a row, by early July some local slab producers started to hold back their offers while waiting for slab prices to rebound.

Soon buyers were accepting higher offers to secure bookings. 

Billet scarcity 
But slab prices would have a boost from the most unlikely source in the second half of 2017.

An unexpected increase in global prices for billet and scrap also influenced slab prices in Brazil.

The technology in place at many mills based in the Commonwealth of Independent States allowed them to shift capacity between billet and slabs, and companies prioritized billet production as it became more profitable.

As a result, most CIS slab producers were sold out of their cargoes by August and customers from Turkey and Italy had few options left to secure volumes.

In turn, Brazilian companies were offering the material at more than $510 per tonne fob, with at least one deal being closed around this level.

CSA acquisition
Another major development in 2017 was the conclusion of the acquisition of slab producer Cia Siderúrgica do Atlântico (CSA) by Latin American steel group Ternium in September.

The operation allowed Ternium to start expanding its finished steel capacity in Mexico.

The downtrend continued until late November, when Brazil-origin slab was reportedly sold as low as $440 per tonne fob.

The lower price pushed some local production out of the spot market and led mills to hold their offers until the last minute in the expectation that prices could not remain low.

The strategy paid off; in mid-December buyers were accepting prices close to $480 per tonne fob.

Offers at the end of 2017 were heard at $490 per tonne, with market participants expecting deals to be closed “if not at this level, a bit lower,” a source told Metal Bulletin.

But the optimism might not be enough to push prices up further. In Asia’s slab market, trading activity remained low in the run-up to the end of the year, with re-rollers still seeking prices of $490 per tonne cfr or below.

Paul Lim, Singapore; and Vlada Novokreshchenova, Dnepr, Ukraine, contributed to this report.