GLOBAL SLAB OUTLOOK: CIS prices set to rise on short supply

Steel slab prices in July will be relatively stable in Brazil thanks to steady fundamentals, and will hold up in Asia despite soft demand, market participants told Metal Bulletin on Friday July 6.

But slab prices are expected to rise in the Commonwealth of Independent States (CIS) amid increasing prices for finished flat steel products and an expected reduction in supply.

Southeast Asia’s and East Asia’s slab import prices in July are expected to either stay stable or to fall slightly, after prolonged inactivity over the past two months, sources told Metal Bulletin.

“Demand has been quite slow, and there should be no big movements [in prices],” an East Asian producer source said.

Participants in Muslim-majority countries including Indonesia were out of the market from May until late June for the holy month of Ramadan and the following Eid Al-Fitr holiday. Many Indonesian participants are now taking a wait-and-see approach to the market.

Slow trading was also seen in June in other Asian markets such as Thailand and Taiwan, amid sluggish downstream sales of products such as hot-rolled coil (HRC) and steel plate, sources said.

Metal Bulletin’s price assessment for slab imports in Asia edged downward during June because of tepid demand and thin trading, falling to $535-545 per tonne cfr on July 2 from $550-560 per tonne cfr on June 4.

The recent lack of trading makes it challenging to forecast the price direction, market participants said.

“Indonesia is a big question-mark now because people here are still trying to get themselves oriented [after returning from the religious holiday],” a trader in the country said.

“If buyers have any price expectations, they’ll probably be very low,” he added.

One re-roller source in Indonesia said that price directions are “confusing” due to the mix of factors influencing the markets for slab and flat steel.

China’s HRC prices are softening slightly, and many countries are retaliating against the United States tariffs [on steel imports under Section 232] with their own duties,” the re-roller source said.

Import appetite for slab will also remain subdued in Indonesia if the country’s currency continues to weaken, preventing slab prices from rising.

Demand in Asia will probably only increase from August onward, which will lead to higher slab prices then, the producer source said.

Metal Bulletin’s price assessment for slab imports in Southeast Asia and East Asia was $535-545 per tonne cfr in the week to July 2, unchanged week on week.

Brazil, US
In Brazil, most market participants believe that slab export prices are on a stable course. Brazilian suppliers will continue to focus on selling spot cargoes to the US, while other markets, principally in Europe, are being supplied through long-term agreements.

An annual quota for semi-finished steel exports shipped from Brazil to the US was recently set at 3.5 million tonnes, and in each quarter the exported volume cannot surpass 30% of the annual limit. The quota was set by the US in lieu of imposing the import tariff on steel products.

Offers from Brazil for September-shipment slab are expected to be launched next week. Suppliers intend to keep their new offers at around $595 per tonne fob, which is the higher end of this week’s range.

“It seems that prices have reached a level that makes both buyers and sellers happy,” an industry source said on Friday.

Another source pointed out that US buyers cannot reasonably expect Brazilian producers to cut their slab prices, considering that domestic HRC prices in the US are now close to $1,000 per tonne.

“The quota of 3.5 million tonnes might be almost full after September-shipment cargoes are sold, so maybe some October/November-shipment cargoes will head toward other non-US markets,” a trader in East Asia said. “But considering the freight cost from Brazil, any available slab is likely to be sold to Europe or Turkey, rather than Asia.”

In June, Brazilian export slab prices started the month at $580-590 per tonne fob, but deal levels rose to $590-600 per tonne fob after importers were heard to be building inventories amid fears of Brazilian tariff-exempt slab becoming scarce.

Bids later fell on strong competition among Brazilian sellers, and Metal Bulletin’s weekly assessment of Brazilian slab prices dropped to $570-585 per tonne fob on June 29. June’s average booking price for Brazilian slab was around $585-595 per tonne fob.

During the first week of July, most of the previous week’s low offers were not sustained. Many deals were heard closed around $590-595 per tonne fob.

CIS, Iran
Export prices for slab from the CIS region are showing some upward momentum so far in July, tracking the rise in finished flat steel prices both in the CIS region and in the markets of slab importers.

Moreover, CIS slab producers are planning scheduled maintenance outages at their mills between August and November. Mills started offering August-rolling material in the first week of July.

“I expect the slab allocation from the CIS to decrease by 300,000-350,000 tonnes over this period,” a source said.

As a result, offers were reported at $520-530 per tonne fob Black Sea early this week, but quickly rose to around $525-535 per tonne fob later on.

No new bookings for CIS cargoes had been heard at those higher prices at the time of publication on Friday, but European buyers were likely to accept the higher prices because their plate prices have been on an upward trend, sources said.

Last month, most slab bookings were done at $510-515 per tonne fob Black Sea. CIS mills were looking for opportunities in Asia during June, with asking prices within the range of $540-565 per tonne cfr.

In mid-June, Russia-origin slab was heard sold to Indonesia at the equivalent of $510 per tonne fob Black Sea. But some producers preferred to sell to Turkey instead, with bookings to Turkey and Europe at the equivalent of around $510-515 per tonne fob Black Sea.

Another reason for CIS slab prices to increase further in July was the reluctance among importers to buy Iranian material, according to CIS-based producers.

“Nobody is willing to book slab from Iran due to the [renewal of] US sanctions,” one producer said.

The US announced its withdrawal from the international nuclear-power deal with Iran in May, and will probably reintroduce economic sanctions on the Middle Eastern state.

Iranian slab prices were most recently heard within the range of $500-505 per tonne fob, down by $5 per tonne from June. No confirmed bookings for Iranian slab were reported in June.

“I heard that an Iranian producer sold one small lot,” a source familiar with the situation said, “but customers in Southeast Asia were reluctant to commit to firm orders for the time being.”

Felipe Peroni in Sao Paolo and Vlada Novokreshchenova in Dnepr contributed to this report.