GLOBAL SLAB OUTLOOK: Price expectations diverge while supply continues to tighten

After slab prices increased in most regions in January, market participants anticipate limited room for further rises - but material availability is expected to remain tight.

Supply was limited in Brazil, the Commonwealth of Independent States and Southeast Asia, while demand has been lively in Turkey and Europe, according to market participants.

Brazil
In Brazil, market participants disputed whether the price will remain strong or decrease, after slab export prices reached historical highs last month. A drop in coal prices, as well as a sudden downtrend in the CIS billet market, led some sources to expect a similar movement to occur to slab.

“Slab should respond to the reduction in coal prices,” a source said. “Prices will look for a $490 per tonne fob level [in the next weeks].” 

Metal Bulletin’s premium hard coking coal index reached $221.89 per tonne fob Australia on February 5, compared with $259.88 per tonne fob Australia on January 2.

But other sources do not expect a downtrend as long as China’s flat steel prices remain strong.

“I don’t see any pressure in slab prices until the Chinese New Year [begins on Thursday February 15],” a source said.

Slab buyers and sellers were concerned about winter production cuts in China, where rumors circulated that the restrictions could be extended until mid-May.

“In any case, [steel] production in China will not increase until there is a clear sign from the government,” a source in the slab market said.

Last month, slab export prices in Brazil increased to historic high levels, reaching $530-540 per tonne fob on January 26, from $500-510 per tonne fob on January 5.

Prices remained stable at the $530-540 per tonne fob level in the first week of February as well.

Southeast Asia
Slab trading was thin in the Southeast Asia region by late January and early February, so market participants were finding it difficult to predict upcoming trends. But most sources were bearish due to the low supply of material amid the region’s ongoing rainy season.

Few transactions have been heard since the last week of January, after major suppliers in the CIS area, Brazil and Indonesia closed their March-shipment bookings. The last major deal heard concluded was for 30,000 tonnes of Iranian slab to Thailand at $525 per tonne cfr during the week ended January 26.

Sellers are expected to return to the market around mid-February to offer April shipment cargoes.

“A few Indonesian buyers are looking to buy slab at around $520 per tonne cfr now, but there are almost no sellers around for negotiations,” an Indonesia-based trader said.

Slab availability has been affected by political issues in Iran, and also by construction projects in Japan for the 2020 Olympics, according to a trader in Singapore.

“A major slab consumer in Thailand has been struggling to buy cargoes, but mills do not have enough volumes to supply [buyers in the country],” he said.

Meanwhile, buying interest also has been dampened by the ongoing monsoon season, with downstream domestic hot-rolled coil and plate producers in the region expected to remain sluggish.

“Flat steel and slab markets are very slow now because the rain has stopped construction activity,” a trader in Indonesia said.

In January, slab import prices in Southeast Asia increased amid reduced trading, as offers were received at higher levels. End-users in Thailand received offers from Asian mills at up to $545 per tonne cfr in late January, but were not willing to accept prices over $535 per tonne cfr.

CIS
Market participants in the CIS region saw limited room for increases in prices, even if the current trend in China’s flat steel market persists.

Slab prices are not expected to exceed $550 per tonne fob Black Sea in the near term, according to a trader.

CIS-origin slab prices rose in January due to reduced supply, as well as increased demand from Turkey and Europe.

Russia’s largest slab supplier, Novolipetsk Steel (NLMK), scheduled two maintenance periods in January – one at its No. 1 basic oxygen furnace (BOF), lasting for six days, and another at its No. 2 BOF, lasting for 20 days, the company’s spokeswoman told Metal Bulletin.

In February, NLMK scheduled two other small repairs, but the steelmaker said these won’t significantly affect output.

Ukraine’s Metinvest is believed to have a maintenance outage at one of its blast furnaces, which is likely to reduce available volumes in February and March, market sources said.

Iran
Metal Bulletin launched a weekly assessment of Iranian export slab prices on January 10, after a consultation period, in response to growing export volumes.

Iranian slab was traded at $510 per tonne on January 31, up from $485-490 per tonne fob on January 10. Mills have given no signs of price reductions, after the increases last month.

An offer at $510 per tonne fob from the country has been holding for two weeks, and producers are not willing to give any discounts.

Sources said some volumes were already sold at this price to Morocco and Southeast Asia.

Fiona Lam, in Singapore, and Vlada Novokreshchenova, in Dnepr, Ukraine, contributed to this report.