GLOBAL SLAB OUTLOOK: US Section 232 fallout, Ramadan break keep market quiet
Global steel slab prices decreased in April, but trading remained weak in all regions due to poor demand and uncertainty about how the market will develop after the Section 232 trade investigation in the United States.
In Southeast Asia, slab offers started to come down early in May, but market participants believe that the current prices are still high.
Despite lower offers, no large increase in supply volumes is expected this month, so trading activity is likely to remain low.
Metal Bulletin’s assessment of Southeast Asia slab import prices reached $560-570 per tonne cfr on April 30, before falling to $550-560 per tonne cfr on Monday May 7.
South Korean slabs were sold to Japan at $560 per tonne fob during the last week of April, while a large shipment of Iranian plate-making slabs was booked at $550 per tonne cfr Thailand.
But few offers have been heard recently from Russia and Brazil, which are the major suppliers to Asian slab consumers.
This is partly explained by the US government’s decision to restrict imports after the Section 232 investigation. Import tariffs were imposed at 25% for Russia-origin slabs, while a quota was set for Brazilian producers.
“It looks almost impossible for any Brazilian slab to be offered to Asia in the near future because Brazilian suppliers are still focusing on selling to North America [at higher prices],” a major trader in East Asia said.
Although CIS countries were not exempt from the tariffs, some Russian producers with US subsidiaries will still need to allocate supplies for their US operations. So the volumes of Russian slab that will be available to other regions, such as Asia, are unlikely to increase, a trader in Indonesia said.
“I think there will be price corrections this month, but not by much,” he added.
CIS slab offers in the first week of May were heard at $560-565 per tonne cfr to Indonesia and Taiwan, down by $10-15 per tonne from the $570-580 per tonne cfr heard a week earlier in Malaysia and Thailand.
The decrease in CIS offer prices to Asia came after prices had been unchanged at high levels of $570-585 per tonne cfr throughout April, amid sparse trading due to the mismatch of bids and offers.
The slowness in the flat steel markets in Asia is expected to keep slab demand in the region weak until the end of June. And some re-rollers are likely to wait for an eventual decrease in slab prices before purchasing cargoes, market participants said.
“It seems that slab buyers will be unable to increase their hot-rolled coil [HRC] prices until the end of May,” a major Asian producer source said.
Moreover, demand for materials will reduce further with the Islamic holy month of Ramadan starting in mid-May and being observed in countries such as Malaysia and Indonesia.
Local transportation in Indonesia will also be restricted for the Eid Al-Fitr religious holiday in mid-June, which will prevent trucks from delivering cargoes within the country. “The Indonesian market will basically be active only for one week in June,” a buyer source said.
CIS mills offered slab at $560-565 per tonne cfr to Southeast Asia, while customers in Taiwan bid $540-545 per tonne cfr.
From the CIS market, the most recent offers heard were within the range of $550-560 per tonne fob Black Sea.
Market sources expect slab prices to decrease in the near term, following the downward trend in the finished flat steel segment. One trading source forecasts that prices will get down to $540 per tonne fob “soon.”
But a source from Russian producer Evraz expects prices to remain firm in the near term due to the currently strong HRC prices in China.
And despite the measures related to the Section 232 investigation in the US market, CIS mills plan to continue their sales. Evraz will continue to ship slabs to US clients without any change in volumes, it said.
From Iran, recent offers were heard at $530-540 per tonne fob Black Sea. A 40,000-tonne cargo was sold to Thailand at $550 per tonne cfr, or around $520 per tonne fob.
The outlook for Brazilian slab is becoming clearer, with a decision about measures related to the US Section 232 investigation expected.
After few deals were closed in April, mostly to the US, companies have held back from the market because there is no information about how a quota for Brazilian steel exports to the North American country will be managed.
The Brazilian steel sector has agreed to set quotas with the US government for steel shipments to the country in order to avoid the 25% tariff under Section 232. Under the agreement, Brazilian steelmakers will be able to export 3.50 million tonnes per year of semi-finished steel goods and around 687,000 tpy of finished steel.
A final agreement had yet to be reached between Brazil and the US at the time of publication, and companies in Brazil were still negotiating how to handle the quota. One of the proposals was to split the volumes between exporting companies based on their performance over the past three years.
“If Brazilian companies compete for quotas, prices would be negatively affected,” a source said. “[But] any solution is better than continuing uncertainty.”
The limit for semi-finished product exports was considered positive for Brazilian slab producers, because it could allow companies to access a market with higher prices. But slab producers will also have to direct part of their production not to the US but to other regions, where prices are lower.
Market participants expect a wide price difference between deals closed to the US market and to other regions. The latest deal heard from Brazil to the US was priced around $580-590 per tonne fob, while the most recent consultation from a client in Asia was around $560 per tonne fob.
“With the limit imposed by the US, Brazilian slab producers will have to get back to reality,” another source said.
“Brazilian producers will have to face two different prices, one to the US and another to the rest of the world,” a third source said.
Metal Bulletin’s weekly assessment of Brazil’s export slab prices surpassed $600 per tonne fob in the first half of April, due to the high offers made to the US market. But the price assessment widened downward on May 4 to $560-600 per tonne fob.
Fiona Lam in Singapore and Vlada Novokreshchenova in Dnepr contributed to this report.