GLOBAL SLAB OUTLOOK: Price trend uncertain despite reduced material availability
The beginning of June was marked by reduced availability of steel slabs in the global market. Despite this, forecasts for price trends were mixed, taking into account the different factors influencing the various regional markets.
The Brazilian steel market was hit by a national truck drivers’ strike which lasted from May 18 until May 31.
The majority of slab producers were affected by the protests, especially by the resulting critical shortages of raw materials, which forced steelmakers to reduce production.
Sources estimate that it will take at least ten days for production levels to return to normal, during which time few offers are expected to be made.
In normal conditions, this would result in a price increase, but the market in the United States is currently at a standstill after the measures taken under its Section 232 trade legislation against Mexico, Canada and the EU. This action imposed the US’s global import tariff of 25% on steel products from those areas, which had been granted temporary exemptions.
The US has recently been the main focus for Brazilian slab producers, and US slab buyers are still waiting to see how the Section 232 situation will develop.
“Each time [US President Donald] Trump makes a move, the market gets stopped for several weeks,” one source said.
There are expectations that steel slab will be exempted from the import restrictions under Section 232 at some point, but no one is certain when this might happen or whether it will happen at all.
By late May, few Brazilian producers were offering slabs because of the production situation and the lack of bids, so sources believe that prices will remain stable for now.
Russian slab producers Novolipetsk Steel (NLMK) and Evraz were also waiting for a decision from the US regarding import restriction on slabs because their assets in the Western country rely on supplies of semi-finished products manufactured at their Russian sites.
Nevertheless, currently the companies continue to supply semi-finished steel products to their subsidiaries despite the 25% import duty, mainly because of the favorable pricing conditions in the finished steel market in the US.
Southeast Asia, Iran
In Asia, participants expect the slab market to remain quiet, at least until the end of the Islamic holy month of Ramadan around June 15. Price expectations are mixed.
One producer source believes that the Indonesian market will “bounce back” and that buying will start again in mid- to late-June, after the Eid Al-Fitr celebrations which mark the end of Ramadan.
The lack of trading activity in recent weeks has made it difficult to predict price directions for this month, sources said.
“But I’m quite certain prices will fall in June, because there’s been very little movement in the market recently. Also, Indonesian buyers are already targeting lower prices of $520-530 per tonne cfr for bookings [of slab imports] to be made in July,” one producer source said.
Moreover, re-rollers are still facing difficulties in achieving their domestic sales targets for downstream flat steel products such as hot-rolled coil (HRC), a trader in Indonesia said.
“Most HRC buyers are holding off from buying, so re-rollers will hope for slab prices to be much lower than the latest bookings [at $560 per tonne cfr],” the trader said.
Meanwhile, the impending reintroduction of US trading sanctions against Iran are likely to cause many buyers to avoid trying to buy Iranian slabs, even though they are typically priced lower than similar material from other origins.
“Asian importers will need to book costlier non-Iranian materials, and many will probably try to buy more CIS slab,” a major South Korea-based trader said.
Asia’s import prices might rise as a result, the trader added.
Ukrainian steelmaker Metinvest is already trying to exploit this opportunity, offering its July-rolling slab to Asian customers at $565 per tonne cfr.
“We hope to achieve sales at this price because demand for the product is high, while volumes are limited,” a company source told Metal Bulletin. Metinvest itself had reduced volumes available because of furnace repairs, the source explained, and there was less material available generally in Asian region because customers have begun to refrain from dealings with Iran.
In late May, offers of slab from the Alchevsk Steel Mill in eastern Ukraine, which is currently under the control of pro-Russia rebels, were also heard at $565 per tonne cfr, but sources reported no update on purchase negotiations.
Last month, Southeast Asia’s and East Asia’s slab prices were at a standstill, largely due to low buying interest amid weak local downstream sales.
Few transactions were reported in May due to a persistently wide gap between bids and offers, although offer levels were falling slightly.
Indonesian buyers also refrained from importing materials because the country’s rupiah was weakening, which made imports more expensive. The currency was trading at 100,000 rupiah to $7.20 on Wednesday June 6, compared with 100,000 rupiah to $7.17 on May 6.
The Black Sea export slab market has also been quiet in the past couple of weeks, with major mills having sold out their June volumes before mid-May.
Despite the absence of trading activity, Metal Bulletin’s price assessment fell to $510-515 per tonne fob Black Sea in early June, against $530-540 per tonne fob in early May. The assessment has been falling since reaching a high for the year to date of $580-590 per tonne fob on March 12.
The drop followed the decline in HRC export prices in the region as well as lower bids from European and Turkish customers because of decreasing finished flat steel prices there.
Metal Bulletin’s weekly price assessment for CIS export HRC dropped to $535-555 per tonne fob Black Sea in early June, against $580-590 per tonne fob in early May.
The price assessment for domestic grade-S235JR heavy steel plate in Southern Europe was €565-570 ($661-667) per tonne ex-works in late May, compared with €585-590 per tonne ex-works at the beginning of the month.
The Turkish export HRC price dropped by $30 per tonne month on month in May, to reach $585-595 per tonne fob in early June.
In these market conditions, customers in Europe were ready to pay $510-515 per tonne fob Black Sea for CIS-origin slab, while Turkish buyers were targeting significantly lower prices.
Despite this, CIS mills were in no hurry to decrease their prices significantly, considering the reduced availability of the material, but preferred to assess the situation and look for better options.
Ukraine-origin slab was available to customers in Europe at $545 per tonne cfr, equivalent to around $525 per tonne fob Black Sea. But material was being targeted on the Asian market at $565 per tonne cfr. A Russian producer said that it will try to make sales at $550-555 per tonne cfr in Southeast Asia.
Some producers also expected Turkey to resume slab bookings in the near term, following the restart of HRC sales from the country to the US after the introduction of tariffs on steel imports from the EU, Canada and Mexico.
Felipe Peroni in São Paulo and Fiona Lam in Singapore contributed to this report.