GLOBAL SLAB WRAP: Prices plunge below steel billet

In May, the global slab market was under pressure from the downward trends in coking coal and iron ore prices as well as weakening fundamentals in the flat steel market, triggered by falling prices in China.

By the end of the month, falling demand meant that slab prices in some markets made the product even cheaper than billet, sources said.

Buying activity in the markets of the Middle East and parts of Asia traditionally slows down at the beginning of Ramadan, which this year started on May 26.

Meanwhile, the billet market has been supported by strong scrap prices and higher long steel prices in China, compared with flat steel.

However, a recent increase in China’s export prices for hot rolled coil (HRC) and plate is making market participants more optimistic about the future of the slab market.

Southeast Asia
In the first half of May, Asian customers were booking slab from Brazil and Russia, as well as regional suppliers, at $415-420 per tonne cfr.

As Chinese HRC prices were falling, customers expected slab prices to drop to $400 per tonne cfr and below.

And by the end of May, slab prices had fallen to a six-month low amid weak demand, brought about by Ramadan in Indonesia and Malaysia, as well as the rainy season in several countries.

A 40,000-tonne slab cargo from Brazil was heard booked in Indonesia at a price of less than $405 per tonne cfr for shipment in July.

A second deal was heard in Malaysia, at a price close to $400 per tonne cfr, for 30,000 tonnes of plate-making slab, sources said.

The market also heard about 50,000 tonnes of Iranian slab being shipped to Thailand.

There are rumours that the Thai buyers may have cancelled this order, however, and that the cargo is now being offered to other Southeast Asian buyers at prices well below $400 per tonne cfr.

One source said that slab prices have now become even cheaper than billet, despite the fact that slab carries a higher production cost.

Offers of July-shipment slab from Iranian suppliers were heard at $370 per tonne fob last week, with customers from Thailand and Italy making bids at $365 per tonne fob.

Meanwhile, Iranian billet was available at $385-390 per tonne fob, with some bookings reported in Indonesia, Egypt and the Persian Gulf within this range.

Thai customers were ready to pay no more than $380 per tonne fob for billet, so no bookings were heard done.

The estimated cost of freight to Southeast Asia and to Italy is around $20 per tonne.

“I think the reason [for the slab price being lower than billet] is demand,” one producer source told Metal Bulletin.

Latin America
Slab prices in Latin America also showed a notable drop in May.

Earlier in the month, one Brazilian company was heard closing a deal to the USA at $405-410 per tonne fob.

There were also rumours of another deal for Brazilian material closed at less than $400 per tonne fob.

Later offers from Brazilian slab producers were heard at $390-395 per tonne fob, with a deal concluded with a customer in Southeast Asia at the same price.

More recently, Brazilian mills decreased their slab offers to $380-385 per tonne fob.

Several cargoes were reported sold to Turkey and Italy at prices a little below $380 per tonne fob, with a final price around $405-410 per tonne cfr in both destinations.

Fresh bids are equivalent to $370 per tonne fob Brazil, which would be equivalent to $400 per tonne cfr or less in the aforementioned markets. Some sources, however, described the price as unrealistic.

Meanwhile, Metal Bulletin’s weekly price assessment for Latin American export billet was $395-410 per tonne fob on June 2, unchanged week-on-week.

Brazilian slab producer Companhia Siderúrgica do Pecém (CSP) had to stop production on May 28 following a fire in the company’s steel mill. The company said later in the week it expected to resume operations “in a few days”. 

Following discussions with market participants, Metal Bulletin is proposing changes to the specifications of its Latin American slab export price.

The consultation period for this proposed change will end on July 2, with changes taking place from July 3. 

Low-priced offers and deals from Iran and Brazil have put pressure on CIS slab suppliers.

On top of that, they were caught between the reduced availability of slab in the region and still-weak sentiment on flat steel in some buying markets in late May.

Recent offers of CIS-origin slab were heard at $400-410 per tonne fob Black Sea, according to market participants.

Russia-origin slab was offered to Turkey at $420 per tonne cfr. The estimated cost of freight to the destination is around $11-15 per tonne, depending on the tonnage.

However, there were no takers for the material, with customers bidding as low as $395 per tonne cfr.

A 20,000-tonne slab cargo from Ukraine was rumoured to have been sold into the Mediterranean region at as low as $390 per tonne fob Black Sea last week.

The lower price is explained by the fact that the supplier was closing its order book for June and combined this cargo with another lot that was ready for shipment to the same destination, thereby cutting its freight expenses, according to the source.

“I do not believe this price can be achieved again, but $395-400 per tonne fob Black Sea could be workable,” the source added.

Looking ahead
The slab market entered June on a downtrend, with customers in Europe, Turkey and Asia targeting prices below $400 per tonne cfr.

A bearish outlook in the coking coal market is also not aiding optimism, as buyers and traders expect to see a further decrease of $5-10 per tonne in the coming weeks.

On June 2, Metal Bulletin’s hard coking coal index was $147.85 per tonne cfr Jingtang.

However, it was still not yet clear whether slab prices will fall much further, largely because of firm export offer prices for hot rolled coil (HRC) from China.

“The recovery in Chinese prices improves the price outlook for slab,” one source said.

By the end of the month, some sources said they expect the influence of Ramadan to decrease and to have a positive effect on demand and prices.

“Prices for July shipment [to Indonesia] dropped, but August shipment prices will move up because of the end of Ramadan,” a source in Asia told Metal Bulletin.

Juan Weik in Singapore and Felipe Peroni in São Paulo contributed to this report.