GLOBAL SLAB OUTLOOK: More competition, poor markets to push prices down further

The downtrend in the majority of the world’s steel slab markets is likely to continue in October amid increased competition between Brazilian, Iranian and CIS suppliers as well as unfavorable conditions in customers’ markets, Fastmarkets was told on Thursday October 4.

Sources in the export slab market in the Commonwealth of Independent States were rather pessimistic about price movements in the next couple of weeks. This was because of the increased presence of Brazilian material in the major sales outlets, which has resulted in lower price expectations among customers.

Customers in Europe and Turkey indicated that a workable price for CIS-origin steel slab would be $470 per tonne fob Black Sea early this month.

In addition, the situation was ambiguous for finished flat steel in customers’ markets, particularly in Turkey.

Fastmarkets’ assessment of Turkish domestic prices for hot-rolled coil (HRC) dropped by $25 per tonne month on month through September, to $560-565 per tonne ex-works on September 28 from $585-590 per tonne ex-works on September 7, amid poor demand.

The Turkish export HRC price assessment decreased by $20 per tonne month on month over the same dates, to $560-565 per tonne fob from $580-585 per tonne fob, but trading activity was abundant. Suppliers were enjoying strong demand, notably in Europe.

And Turkish mills planned to continue to export HRC at attractive prices because of the weakening in the exchange-rate value of the country’s lira.

At the same time, the fall in the lira’s value means that Turkish customers will be looking for more attractive slab prices.

“So far, the outlook is completely negative,” one trader said, noting that he expected slab prices from the CIS to drop to $470 per tonne fob Black Sea in October.

“Some suppliers already provide offers at $470 per tonne fob Black Sea,” a source on the producers’ side told Fastmarkets.

Another producing source said that prices may even fall to $460 per tonne fob Black Sea.

But some sources hoped that the reduced availability of slab from Ukraine in October, due to maintenance work at producer Metinvest’s Azovstal Iron & Steel Works, would render support to the CIS export slab market.

Fastmarkets’ weekly assessment of the CIS export slab price was $475-485 per tonne fob Black Sea on October 1.

Recent sales in the Black Sea market were heard within the range of $480-485 per tonne fob in Turkey.

Meanwhile, in Southeast Asia, several Russia-origin cargoes were sold at $500-510 per tonne cfr.

Southeast Asia, East Asia
Market participants in these regions believed that the current downtrend in steel slab prices will continue, and that they will fall below $500 per tonne cfr this month. Abundant supply coming from major export markets such as Iran, Brazil and the CIS will probably keep import prices weak during October, they said.

Subdued demand from re-rollers, which were struggling with weak currencies and slow local sales for finished flat steel, was another reason for the bearish sentiment in the regional markets.

The persistent slump of Asian currency values against the dollar was one factor that will continue to reduce the import appetites in the region, sources told Fastmarkets.

Indonesia’s currency was trading at 14,908 rupiah to $1 on October 1, compared with 14,806 rupiah to $1 on September 1.

One trader in Indonesia said on October 1 that the country’s slab demand had been stable over the past week. But Indonesia’s finished flat steel market typically experiences a seasonal slowdown in the final quarter of the year, and this was expected to reduce slab demand during that period, according to an Indonesian re-roller source.

“China’s possible price downtrend for flat steel might also bring prices down for those products in the rest of the world,” the same source added.

“But the price drops in October will probably not be huge,” a trader in East Asia said, “because slab prices have already fallen quite a lot and should be close to bottoming.”

Fastmarkets’ weekly price assessment for slab imports into Southeast Asia and East Asia was $500-515 per tonne cfr on October 1, down by $30 per tonne from $530-545 per tonne cfr on September 3.

On the supply side, the United States’ Section 232 import tariffs and quotas, as well as the country’s trading sanctions against Iran, will help to ensure an ample supply of slabs for the Asian market, and to keep import prices low this month, an Indonesia-based trader said.

Iranian slab suppliers had no way to attract customers other than to cut prices, given the trading sanctions which have made most customers refrain from trading with the Middle Eastern country.

In addition, the number of shipping companies willing to operate in Iran has decreased, which has almost doubled the cost of freight.

In particular, to Southeast Asia, the cost of freight increased to around $30 per tonne from $18-20 per tonne, according to a source in a Dubai-based shipping company.

In these conditions, Iranian producers reduced their slab offer prices to around $460 per tonne fob in early October, from $480-485 per tonne fob earlier in September.

With the price reduced, several cargoes of Iranian billet were heard sold at $450-455 per tonne fob at the end of last week, to Southeast Asia in particular.

And a re-roller in East Asia confirmed that it had procured slab from Iran at $485 per tonne cfr.

In the absence of any opportunity to sell slabs to the US due to quota issues, Brazilian slab producers have been forced to try to sell to other markets such as Turkey, Europe and Southeast Asia.

But to attract customers in these regions, they have had to reduce their prices significantly compared with what they were offering to the US.

Fastmarkets’ weekly assessment of Brazil’s slab export prices dropped to $500-510 per tonne fob on September 28, compared with $520-540 per tonne fob on September 7.

After the latest assessment was filed, however, a cargo was reported sold to Asia at $485 per tonne fob.

New bids for Brazilian slab were now being placed as low as $470 per tonne fob.

It was widely expected that offers of Brazilian material to the US for January delivery will be launched late this month, when the annual quota for steel imports from the South American country into the US will be renewed.

One international trader said, however, that Brazilian suppliers will start offering January-delivery slab to the US only in December.

“There will be a price increase in December because Brazilians will switch to the US market,” the trader said.

There was no certainty about how much prices would rise at that time, but sources have been estimating prices around $570 per tonne fob, a level close to those seen in June and July this year, when sales to the US were the main focus of Brazilian producers.

The international trader source expected CIS slab prices to rise by $20-30 per tonne in these market conditions.

Felipe Peroni in São Paolo and Fiona Lam in Singapore contributed to this report.