Russian HRC could be sold secretly via China

There is an increasing likelihood that Russian hot-rolled coil might be sold through Chinese channels in the near term due to the mounting sanctions being imposed on Russian oligarchs and businesses, a trader in Asia told Fastmarkets on Friday March 11.

“Russian HRC may move by train across the border into China, to be re-sold as China-origin materials to the Asian markets,” he said.

This may also become a permanent fixture of the Asian hot-rolled coil market if the sanctions remain, making it difficult for market participants to differentiate whether their substrate is from Russia or China.

“This may also involve some nifty paperwork, if it’s going to work,” the same trader told Fastmarkets, referring to the accompanying bill of lading and other trade documents to be presented to banks and buyers.

Such operations will not come cheaply, the trader added, due to additional risks and logistical costs that traders handling such cargoes will incur.

“There could be premiums as high as $100 per tonne for such material, with Russian mills seeing lower prices for their material on an fob basis if they wish to compete with the rest of the spot market,” he said.

The disappearance of Russian and Ukrainian HRC and semi-finished steel have left a gaping hole to be filled in the global steel market, causing prices for billet and slab, as well as HRC and rebar, to shoot up after Russia invaded Ukraine on February 24.

Steelmakers around the world are aiming to sell into the lucrative European market, offering HRC at prices as high as $1,100 per tonne cfr Europe and ignoring lower-priced smaller economies in Southeast Asia such as Thailand or Indonesia.

“Only Chinese sellers can offer at $910-915 per tonne cfr Vietnam now, but they will also increase their offers soon,” a buyer source in Vietnam told Fastmarkets on Friday March 11.

He estimated spot prices in Vietnam at around $900-910 per tonne cfr.

This is a whopping $200-per-tonne difference, which could be further exacerbated by the high prices that European buyers are willing to pay to secure slab.

“Bids for slab were as high as $960 per tonne cfr Europe this week, and are likely to continue increasing,” a trader in Singapore told Fastmarkets on Tuesday.

This means that HRC prices will continue to rise because European steelmakers will need to factor in their raw material costs, the first trader said.

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