Russian domestic steel premium over exports to rebound in 2021, key steelmakers say

The premium paid for domestic steel products in Russia over exports - and for flat steel in particular - is unlikely to rebound until 2021, major Russian steelmakers NLMK and MMK said this week.

“The discount [or reduction to the domestic market premium over the export market] was driven by both strong export benchmarks and a weak rouble,” Novolipetsk Steel (NLMK) chief executive officer Grigory Fedorishin said on Wednesday October 21.

The month-to-date average of Fastmarkets’ weekly price assessment for steel hot-rolled coil, export, fob Black Sea, CIS was $485 per tonne on October 23, up from an average of $407.50 per tonne fob in July before prices embarked on an uptrend.

The HRC export price began to rise quickly in August amid returning demand from the traditional markets of Turkey and the Middle East and North Africa region, which kept stocks low over the lockdown period and meant market participants only began to restock when economic activity was rebounding.

“Historically, [the pace of the premium’s recovery] strongly depends on seasonality,” Fedorishin said. “Given that we’re entering a weak season in terms of steel consumption, I wouldn’t expect the premium to fully recover before the next season, [which would be] March next year. By then, we should see the premium [in the domestic market] coming back to its historic average of $40-50 per tonne.”

The month-to-date average of Fastmarkets’ weekly price assessment for steel hot-rolled sheet, domestic, cpt Moscow, Russia was 42,450 roubles or $547.74 per tonne, including 20% value-added tax, in October.

That means that the gap between the two assessments narrowed to $70.69 per tonne in October 2020, compared to $280.92 per tonne a year before. The average gap so far in 2020 reached $138.58 per tonne fob, yet in September, the gap was even narrower at $45.13 per tonne.

There was also pressure on Russia’s local market premium due to the loss in value of the rouble, Magnitogorsk Iron & Steel Works (MMK) CEO Pavel Shilyaev said on October 22.

The rouble has been weak since early June, with the US dollar trading at $1 to 76.73 roubles on October 22, compared with $1 to 68.51 roubles on June 9, according to exchange rate website

“We expect that, within one-and-a-half-to-three months, rouble prices will recover and [the] premium will be some $50 per tonne or even higher next year,” Shilyaev said.

Sign up to Fastmarkets’ free webinar on November 4, 2020, 9am GMT: European flat steel market – on the mend after the Covid-19 fallout?

– Overview of EU flat steel price developments in 2020 so far
– Suppliers’ response to the demand drop
– Fortress Europe? Toughening of trade defense measures
– The survival of European steelmakers with high raw material costs
– Demand contraction and a slow path to recovery
– Near-term price outlook