Following the news about the commissioning of a new hot strip mill by the major Indonesian steel producer Dexin Steel at the beginning of this month, market insiders have been actively discussing the impact on global steel trade for hot rolled coils (HRC) but also on the slab market. Most believe Dexin entering the HRC market will lead to an increase in competition in the Asian market as well as in Europe.
Specifically, according to the representatives of the company, this month the company has launched its hot rolling mill with an annual production capacity of 4.5 million mt of HRC, including 1 million mt of stainless coils and 3.5 million mt of carbon steel. According to sources, Dexin Steel has already started selling some small quantities of HRC as test samples and may soon enter the export market with trial orders.
One of the main interests of the company in terms of HRC export sales has been the European market, not only because this market is more cost-effective as compared to the Asian region, but also due to the recent safeguard measures imposed against other Asian suppliers, making ex-Indonesia HRC more attractive. In particular, the new restriction cap of 15 percent imposed on July 1 in the EU, applies to six countries, including Vietnam, Japan, Taiwan, Egypt, Australia, and Brazil, which used to ship their HRC under the residual tariff-rate quota, which means more European buyers will be looking for alternatives like Indonesia, though, according to sources, prices remain an issue as currently local HRC is more competitive. “While Indonesian producer Krakatau Steel has already started to actively offer its HRC in the EU, especially in the south, Dexin Steel is not offering so far, negotiating with big EU buyers for technical and commercial agreements,” a market sources told SteelOrbis, adding that “Probably Dexin will officially start to offer its HRC in late July-early August.”
At the same time, apart from the impact on the HRC market, the start of new HRC production is also expected to reduce allocation of slabs sent by Dexin Steel to the export market. In particular, the slab allocation from Dexin is estimated from 50,000 mt to 200,000 mt per month depending on the market situation. “We don’t expect many changes in the slab segment in the immediate future, but, yes, their volumes will certainly decrease this year,” a market insider said.
Dexin, the leading ASEAN steel producer last year, commissioned its third 1,780 cubic meter blast furnace and expanded its steel output from 4 millon mt per year to 7 million mt, while, according to sources, in the long term Dexin’s annual production capacity will reach 20 million mt. The mill produces slab, billet, wire rod, rebar and now HRC, with the product rmix varying according to market demand.