Russian longs market sees year-to-date high in May

Wednesday, 30 May 2007 14:37:09 (GMT+3)   |  
       

In May 2007 the Russian domestic longs market reached its highest point since the beginning of the year. Due to the construction boom in the country, which became visible as soon as the weather conditions were suitable for the continuation of last year's projects and the commencement of new ones, the Russian longs market started to set new records for both consumption and prices.

Compared to May of last year, during the current month of May the Russian longs market has developed much faster as regards both prices and demand. Thus, whereas during May 2006 producer prices for the domestic Russian market increased only slightly, during May 2007 the producers entered the market with prices 9-18 percent higher than April's offer levels. In the Russian retail market the price rise has been even higher. Thus, whereas during the whole month of May last year the price increase for rebar totaled Ruble 500-600/mt and was about Ruble 200/mt for wire rod, during May this year similar long product price increases have been seen within the space of just two weeks. Therefore the Russian domestic longs market is developing twice as fast as it did last year. In addition, the fact that domestic traders have not fully implemented the producers' increases means that the price rising trend will most likely continue at least during the first half of June, regardless of the producers' price policies for month of June.

Prices in the Russian longs market continue to rise due to the high demand coming mainly from the county's construction industry. As early as mid-March both Russian semis and longs producers started to focus primarily on the needs of the domestic market, with the result that Russian products faded from the export market. In May of the current year the Russian exporters shipped abroad only minor loads of semis while no export deliveries of longs products were seen. The major Russian semis export market in May was Iran, which is currently experiencing a boom in its domestic steel industry, but which lacks semis for production.

Import deliveries to Russia from the CIS and other longs producing countries were very visible in the Russian domestic market. These deliveries were evenly distributed throughout almost all Russian territory; Turkish, Ukrainian, Moldovan, Latvian and Belarusian products were mostly found in the central and western parts of the Russia, Turkish and Kazakh products were to be found in the south, while Chinese rebar was widely present in the Ural and Far East regions of Russia. On the other hand, last year imported products appeared in the Russian domestic market only in the middle-to-end of the summer period. It should be also remarked that Egyptian products are not currently present in the Russian domestic market as was the case last year, due to the steel export duty imposed by the Egyptian government at the end of February.

As regards the price spectrums, imported products are being offered at slightly lower levels than Russian-origin products. Thus, during May 2007 the price for Chinese-origin rebar in the Russian retail market was registered at $900-950/mt (including VAT) in the Far East regional market, rebar from the CIS producers was offered by local traders in the western and northern regions of Russia at $950/mt (including VAT), while the same material of Turkish origin was quoted at $960/mt (including VAT). Meanwhile, products of domestic origin stood at an average of $970/mt (including VAT) in the central and northern regional retail markets and at $1,020/mt in the Far East regional retail markets.

In addition, not only did the Russian longs market attract the producers from the CIS states, it also affected the domestic markets of these countries; as early as the beginning of May, many longs producers in Ukraine, Belarus and Kazakhstan hiked their domestic long prices by an average of 10 percent, regardless of domestic market demand.

As for the short-term market prospects, the Russian domestic market price rise is expected to continue till the end of the construction season, with the strong demand unlikely to fade. However, the rate of price increase may be smaller in June, as a slowdown has been noticed during the second half of May. Yet, if Russia imposes the antidumping duty on Ukrainian origin rebar, then prices in the domestic market may jump to sky-high levels, due to the fact that in its current state the Russian domestic longs market is able to satisfy its needs by itself.


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