GLOBAL SLAB OUTLOOK: Expectations mixed with market waiting for activity to restart

The lack of buying activity at the beginning of the year has created mixed expectations about which direction global steel slab prices will take in January.

Some market participants were bearish, suggesting that a splash of buying activity will be short-lived, at least in Asia, amid generally sluggish demand for finished flat steel in the region as well as the approaching Lunar New Year holiday.

Besides that, Chinese export hot-rolled coil (HRC) prices have started to slip amid weakening activity in the local market.

Metal Bulletin’s daily index price for Chinese export HRC was $570.13 per tonne on Friday January 5, against $576.30 per tonne on January 2.

But the majority of market participants were optimistic, forecasting that the upward trend that started in December will continue, supported by a recovery in demand after the year-end holidays and reduced availability of slab in the global market.

Sources familiar with the Brazilian market expect prices to keep increasing in January.

Metal Bulletin’s weekly price assessment of Brazilian slab exports reached $500-510 per tonne fob on January 5, against $470-480 per tonne fob a week earlier.

Producers are still considering whether to resume making offers in early January or to delay their return to the market because prices are expected to keep improving.

“No firm offers are being made yet this month,” a source said.

“It seems that raw materials prices will continue to be strong in early 2018,” another source said, noting that this will support the slab sector.

The main perception among market participants is that volumes of slab from other regions will be limited, while prices are not attractive. “Buyers do not have many options,” a source said.

In December, Brazilian prices went up by $20-30 per tonne over the month.

In early December, producers were offering slab at $460 per tonne fob in price negotiations for late January and February, when they tried to raise prices from previously low levels.

But buyers were still trying to secure bookings at past levels of $440 per tonne fob, leading the market to a halt.

There was also pressure from raw materials prices, and producers did not accept low bids.

By mid-December, deals had been closed at $475-480 per tonne fob, and later in the month most slab producers were offering at prices no lower than $490 per tonne fob.

Sources in the CIS market were also rather optimistic in their forecasts, referring to the positive sentiment in the slab market as well as reduced availability of the material in the region.

“Our short-term forecast says that the slab price will catch up with billet and will possibly be even a bit higher, as we see an uptrend in the slab segment now,” Dmitry Nikolayenko, sales director for Metinvest, Ukraine’s largest steelmaker, told Metal Bulletin.

Metal Bulletin’s assessment of the CIS export slab price was $505-510 per tonne fob Black Sea in the last week of December, up by $40-45 per tonne since the beginning of the month.

Recent confirmed bookings to Europe and Turkey were reported done within the quoted range.

Metal Bulletin’s CIS export billet index closed in December at $514 per tonne fob Black Sea.

Southeast Asia
Meanwhile, in Southeast Asia, end-users maintained a bearish outlook on the downstream HRC and steel plate industries for January, citing sluggish demand and the upcoming Lunar New Year holiday in most parts of Asia as damping factors.

There have not been any new slab transactions or price negotiations heard in the first week of January, with trading activity expected to pick up from the second week onward once major buyers start issuing tenders to look for slab volumes.

“Given the current downstream conditions, we feel that $500-510 per tonne cfr Southeast Asia is a good price,” a major end-user said. Other buyers said they were on the sidelines waiting for firmer price directions from the second week of January onward.

Traders were looking to offload cargoes at more than $500-510 per tonne cfr Southeast Asia, however, as the steel mills used recent increases in billet prices to raise slab offers to $530 per tonne in the second half of December.

“End-users were surprised to see billet prices increasing so rapidly and may think that steel mills are shifting their focus to billet production instead of slab. Those who are short of slab inventories may have to increase their bids in the coming weeks to secure sufficient slab inventories to operate their re-rolling mills,” a seller said.

Several cargoes of Iran-origin slab were rumored sold to the region at $510-515 per tonne cfr in late December, but this information could not be confirmed at the time of publication.

Paul Lim in Singapore and Felipe Peroni in Sao Paolo contributed to this article.