GLOBAL STEEL SLAB OUTLOOK: Section 232 tariffs spark uncertainties

Offers for Brazilian slab will likely increase in April on sellers’ optimism despite growing resistance from buyers, after the United States temporarily delayed its Section 232 import tariffs on Brazil.

But in Asia, slab prices are expected to remain steady or even decline slightly on sluggish trading and weakness in upstream and downstream segments, while products from the Commonwealth of Independent States may become cheaper on lower demand from Turkey due to the US tariffs.

Slab supply is said to be still limited in the global market, especially in the Southeast Asian and East Asian regions.

There are big ifs in the Brazilian market, looking ahead.

Sources expect prices to continue moving up because supply is limited and buyers are said to have few options.

But buyers are showing growing resistance to the price increases, market participants told Metal Bulletin.

Some companies that re-roll slab in Brazil to export to Europe and other markets are having trouble with their sales, and are thus reducing downstream production because their prices are not competitive compared to those using third-party slab.

Nonetheless, slab producers are insisting on raising their offer prices, sources said.

Brazilian sellers are more optimistic and less willing to accept any price reductions now because Brazil has been temporarily exempted from the recent tariffs introduced by the US in the wake of its Section 232 investigations on whether steel imports posed a national security threat. This allows them to continue to export to the US.

New price indications from suppliers are above $590 per tonne fob.

“Even if Chinese prices are falling, we believe [Brazil’s] prices will increase further,” an industry source said.

Another source said: “Producers are pushing slab prices up.”

Strong demand from the US, Mexico and Turkey have also been providing support to slab prices, and this upward trend is expected to continue, at least in the first two countries.

What may really decide the market’s direction is the possibility of an agreement between Brazil and the US regarding Section 232.

The suspension of the US tariffs for Brazil and several other countries will last until May, while negotiations take place for permanent exemptions.

Brazilian steelmaker Companhia Siderúrgica Nacional (CSN) said a deal is being discussed with US authorities to obtain quotas for several Brazil-origin products including slab.

But some market participants in Brazil have raised concerns on how such a quota may be administered, worrying that either an overall quota or individual limits for each company could lead to disagreements.

Over the past month, the temporary US tariff exemption was big news for Brazilian producers, especially in the slab segment.

Metal Bulletin’s weekly assessment of Brazil’s export slab prices was $580-590 per tonne fob on March 29, unchanged from the preceding week.

No offers were made last week because mills have not started booking June-shipment cargoes yet, and all available materials for May shipment have already been sold.

In Southeast Asia and East Asia, participants generally have a stable to bearish outlook for the market, although the lack of offers and transactions of late made it difficult to predict price directions.

Rapid price drops for finished flat steel and raw materials will likely cause slab prices to move down in Asia and other regions such as Europe and Turkey, a trader in East Asia said.

“In contrast, North American slab demand is still very strong and Brazilian suppliers are trying to raise their offer prices to that region again,” he added.

Slab supply is expected to remain tight because Brazilian mills, which are among the largest suppliers of slab to Asia, are still selling to the US due to the temporary exemption from the new Section 232 tariffs.

Brazilian mills will release their June-shipment offers in the second and third weeks of April, with a target price of at least $590 per tonne fob, which is about $620 per tonne cfr Southeast Asia.

Asian slab buyers are mostly unable to afford to pay as high as consumers in the US and Europe, which will result in Brazilian suppliers continuing to show a preference for the US while mills in the CIS focus on Europe, traders and buyer sources said.

It is possible that some mills from countries other than Brazil might lower their offers to seek alternative markets in response to the US tariffs, an Indonesia-based trader said.

But any price decreases in the coming weeks will be minimal, he said.

June-shipment cargoes, which are usually booked in April, are estimated to be tradeable around $590 per tonne cfr Southeast Asia, compared with $595 per tonne cfr for April-shipment cargoes, he said.

“That $5-per-tonne drop is not significant,” the trader in Indonesia said.

The Asian market is expected to remain quiet over the next few weeks, with prices likely to be largely stable in the absence of offers made to the region, sources from major suppliers and re-rollers said.

“But buyers will have to start accepting the higher prices once they are unable to hold off on inquiries any longer,” a Southeast Asian re-roller source said.

The sustained tightness in slab supply over the past few weeks has resulted in a mounting sense of urgency among Southeast Asian buyers to secure materials for May/June shipment, market participants told Metal Bulletin.

Some slab consumers in the region are beginning to indicate their interest at higher levels, although mills have yet to accept those prices.

“Nobody can really tell what’s going to happen,” the Southeast Asian re-roller source said.

“Last April, there were slight price corrections for slab, but this year we have so many uncertainties due to Section 232,” the re-roller source said.

Metal Bulletin’s assessment of import prices for slab in Southeast Asia and East Asia was $575-590 per tonne cfr for the week to Monday, up $10-15 per tonne week on week.

Indonesian re-roller Krakatau Steel, which recently denied rumors of a delay in its blast furnace start-up, will start its slab tender in the second week of April, market participants said.

Another major slab buyer in Indonesia issued a tender early this week for up to 40,000 tonnes of materials. It is aiming to pay $560 per tonne cfr, traders said.

CIS, Iran
There was too much uncertainty in the global market for market participants to comment in detail on the future of slab in the CIS.

Several industry sources believe prices for the semi-finished product will go down this month, although they are not sure by how much.

Countries in the CIS region, unlike Brazil, are not exempted from the US import tariffs.

The weak hot-rolled coil market in China is putting downward pressure on prices in the rest of the flat steel markets, sources said.

Moreover, Turkey – an active importer of CIS slab – is “shocked” by the US’s decision to impose Section 232 tariffs on its products, sources said. If Turkish producers cannot sell rebar to the US because of the tariffs, they will have to cut their billet consumption and produce more slab instead.

“Most mills in Turkey have convertible capacity to switch from billet to slab production, which means they may produce more slab domestically if less billet is needed, and hence the import of slabs will be diminished,” a source said.

One CIS producer said, “One thing is clear – the Turks are not willing to buy slab at $600 per tonne cfr anymore.” That price is equivalent to $585 per tonne fob Black Sea.

Another market participant said he expects slab prices in April to fall by about $20 per tonne.

Metal Bulletin’s assessment of export prices for CIS slab was $580-585 per tonne fob Black Sea for the week ended April 3, unchanged since mid-March when deals were concluded with buyers in Europe and Turkey.

In Iran, the latest export offers for slab were heard at $550 per tonne fob this week to Europe, North Africa and Asia.

Khouzestan Steel set a target price of $550 per tonne fob for slab in its recent tender, citing improved demand in the Southeast Asian market.

But market participants said that a workable price range was around $520-530 per tonne fob.

Metal Bulletin’s Iranian export price assessment for steel slab widened downward to $530-550 per tonne fob for the week to Wednesday, against $545-550 per tonne fob a week earlier.

Felipe Peroni in São Paulo and Vlada Novokreshchenova in Dnepr, Ukraine, contributed to this report.