GLOBAL SLAB OUTLOOK: Prices to rise while market awaits clarity on Section 232

The possible introduction of steel import restrictions in the United States under Section 232 became the dominant topic of conversation in the global market in the second half of February.

Section 232 allows the US president to impose trade sanctions on imports if he believes that they pose a threat to national security.

One product that is central to the operations of several US mills is semi-finished steel, and 7.53 million tonnes of such material was imported in 2017, according to data from the US Department of Commerce.

Brazil was the principal supplier of semi-finished steel products to the US last year, sending 3.78 million tonnes, mostly slab.

It was followed by Russia, which sent 2.14 million tonnes of semi-finished products, again mainly slab.

On Thursday March 1, US President Donald Trump announced that he will impose tariffs of 25% on steel imports and 10% on aluminum imports “next week”.

Details were still being worked out, he added, but he assured executives from ArcelorMittal, US Steel, Nucor, Evraz, JW Aluminum, Century Aluminum, AK Steel, Timken Steel, United Aluminum and others that the tariffs would be imposed.

There was no comment on semi-finished steels or other raw materials, and no comment on whether or not the US’ partners in the North America Free Trade Agreement (Nafta) would be exempt from the blanket tariffs.

“It seems illogical to impose tariffs on imports of semi-finished steel when the volumes produced in the country are not sufficient and new capacities are not being built,” a source in the CIS region said to Metal Bulletin.

“If a 25% blanket tariff is approved [by the US] and it includes slabs, the price would become volatile for weeks or months,” a source in Latin America told Metal Bulletin.

“The first price movement will be a strong price rise because there will be a rush for quick-delivery volumes. Then prices would start falling, and after that they would probably stabilize at a lower level than now,” he added.

Brazil’s steel institute said that most of the country’s exports to the US are semi-finished products.

Leaving Section 232 aside, there are rumors that US buyers are already rushing to increase their slab inventories. Sources say that new offers expected next week could be $20 or even $30 per tonne above the current prices. If deals are confirmed at such levels, this might take prices to a new normal.

Metal Bulletin’s weekly price assessment for Brazilian export slab was $540-545 per tonne fob on March 1. The assessment has gone up by $5-10 per tonne over the past month.

The latest bookings were heard done at $540-545 per tonne fob with buyers in Europe, the US and Mexico. But a source said that Turkish clients were desperate to buy and if anyone had an offer at $545 per tonne fob it would be easy to get a firm bid.

CIS slab suppliers also expect to see some increase in the product’s prices in the near term, considering lively demand from Turkish and European customers amid rising prices for finished flat steel.

Metal Bulletin’s CIS export slab price assessment was $540-550 per tonne fob Black Sea on February 26, up by $10 per tonne over the month.

But by the end of last week, a Ukrainian producer had managed to achieve $575 per tonne cfr in deals with Turkish and European customers, equivalent to $555-560 per tonne fob Black Sea.

“Considering the fact that we keep receiving inquiries, we plan to make another round of increases next week,” a source with the company said, noting that the decision will be made on March 5.

Sources noted that another factor behind price growth was the increase in the number of bids from Asian customers, who are ready to pay $15 per tonne more than last week’s prices.

But no sales were reported done from the Black Sea market to that region, amid reduced availability of material and good demand from regular customers.

Southeast Asia
Market participants in Asia were concerned about the shortage of slab available to the region in February, with buyers and traders surprised by the lack of offers heard, which is expected to keep prices high.

Almost all the large mills in Russia, Brazil and South Africa seem to have sold out their cargoes for April shipment, with some even already booked for shipment in mid-May, sources said. “Many producers will probably only be supplying to their own production facilities for now,” an Indonesia-based trader said.

In addition, one major CIS supplier’s furnace is undergoing maintenance despite the strong demand caused by bullish flat steel markets, a South Korean trader said.

“There is also more slab being supplied to subsidiary mills within steel groups, which reduces supply to the spot market,” he added.

A major East Asian supplier has also paused its slab exports temporarily to focus on selling finished products instead.

Some Brazilian mills will be returning to the market with their May-shipment slab offers in the first and second weeks of March, sources said.

Buyers in Southeast Asia are expected to need to replenish their inventories soon, although they are still unwilling to accept the high offers in the market at the moment due to their weak domestic markets for finished steel, traders said.

“Unless they’re able to push up the prices of local finished goods, we don’t know when they will start buying slab again,” the Indonesia-based trader said.

A major slab consumer in Indonesia intends to produce its own slab in the meantime, because current offers heard at $586-595 per tonne cfr in the week ending March 2 were too expensive.

Metal Bulletin’s assessment of import prices for slab in Southeast Asia and East Asia was $550-570 per tonne cfr for the week to February 26, up by $30-35 per tonne over the month.