GLOBAL SLAB WRAP: Prices start to drop on cheaper coal, Turkish uncertainty

Slab prices were stable for most of January amid tight supply and support from flat steel products, but falling coking coal prices and the sudden entrance of Turkey into the picture affected the market.

Export prices from the CIS were unchanged for almost the entire month at $415-425 per tonne fob, but tumbled by as much as $25 per tonne in the week ending Monday January 30, to $390-420 per tonne fob Black Sea.

In Latin America, exporters enjoyed peaks of $430-440 per tonne fob for part of January, before seeing prices drop to $425-430 per tonne fob in the last week of the month.

Finally, in Southeast Asia and East Asia, which together comprise the world’s biggest slab-buying market, prices reached a maximum of $445-450 per tonne cfr early in the year and ended January around $430-435 per tonne cfr.

In this inaugural monthly global wrap, Metal Bulletin looks back at the key factors driving slab prices across the globe in January 2017.

The slab export market in the CIS region started the year with limited offers in the spot business, mainly around $425 per tonne fob Black Sea, as most Russian and Ukrainian mills were focused on supplying their own steelmaking assets.

Several market participants were expecting to see a rise in CIS slab export prices then, on increases in Chinese hot rolled coil (HRC) export prices at the time.

But in the following weeks Turkish customers started to lower their bids, due to their weakening domestic and export HRC markets, as well as the depreciation of the Turkish lira against the US dollar.

Turkey’s deep-sea scrap import market also collapsed toward the end of January, which prompted some of the country’s mills to venture into billet exports.

Against this background, there was news of at least one slab deal closed in Turkey at only $390 per tonne fob Black Sea, reportedly for Russia-origin material, even though some market participants expressed scepticism over such a low price.

“There has been no sharp drop in the slab segment yet,” one source said.

A second source believed that a workable price at the moment would be around $400 per tonne fob Black Sea, but no less than that.

“The decline in scrap and billet prices [in Turkey] will have an influence on slab,” a third market participant in the CIS said. “The decline will not be very big – around $20 per tonne.”

Latin America
Meanwhile, Brazilian slab suppliers benefited from high prices in the USA and Europe for most of December and January.

Bookings were heard in the USA at around $455 per tonne cfr in January, which would be equivalent to about $440 per tonne fob Brazil, according to market participants.

The profitable market in North America and, to a smaller degree, in Europe prompted Brazilian mills to ask unworkable prices in Asia earlier in January, at $460 per tonne cfr and higher.

Buyers elsewhere also became reluctant to buy Brazilian slab, because of the steep decline in coking coal prices throughout January.

“I’ve received offers [at $440 per tonne fob] to Europe, but could not get any bookings due to the weak market and currency volatility,” one Brazilian source said two weeks ago.

Because of the high offer prices, Asian re-rollers in Thailand turned to Iranian material toward the end of January, with at least one 50,000-tonne cargo from the Middle Eastern country heard traded at around $430 per tonne cfr.

And before the month reached an end, CIS-origin slab for HRC production was heard booked in Indonesia at around $435 per tonne cfr, for April shipment.

Talk of CIS slab sold in Indonesia around $425-430 per tonne cfr, for plate production, could not be verified at the time of publication. Nor could news of a new batch of Iranian material changing hands in Southeast Asia for less than $420 per tonne cfr.

The market lull in the region, however, had already forced Asian slab suppliers to review their offer prices downward – Japanese material was heard priced as low as $440 per tonne cfr in Indonesia, while slab from another Asian country was offered in Thailand at around $435 per tonne cfr.

Looking ahead
For February, one of the main factors affecting the slab market will be the health of the Turkish market.

One market participant said that not only were Turkish slab re-rollers bidding lower prices, but some of the country’s steelmakers could themselves be interested in exporting the semi-finished product.

“They’re interested in exporting slab,” he said. “They’ve been fishing around in the market.”

One source in the CIS believed that only one Turkish mill would actually be interested in exporting slabs – not because of low production costs but because it planned to stop one of its rolling mills for flat steel.

Outside Turkey, coking coal prices would be another major driver for the slab market, sources said.

Metal Bulletin’s fob Australia premium hard coking coal index ended January at $170.39 per tonne, down by 26.17% from $230.79 per tonne fob on the last day of December.

Major suppliers from Brazil and Russia would be mainly selling March-production, April-shipment cargoes in the first weeks of February, which would have lower production costs compared with material to be produced before that.

Finally, market participants will be paying close attention to flat steel prices in China after the end of the Chinese New Year holiday.

“Some [Asian slab] buyers are waiting to see what happens after the holiday before they buy,” one regional source said.