Following the rather active export hot-rolled coil (HRC) sales for August production, which were earlier concluded mainly to Turkey and India, ex-Russia suppliers have decided to step back from trading abroad. The key reason is the livelier domestic market, where some postponed demand has been seen. Moreover, the active local sales allowed Russian mills to increase the finished steel capacity utilization rates, following the cuts, performed for May-July production.
According to Russia-based flat steel producers, the local demand has improved recently, having allowed them to trade significant volumes and to feel more relaxed on exports, which have been stressful due to many issues, connected with the sanctions. The most recent domestic hot-rolled sheet (HRS) prices in the Russian domestic market have been set at around $720-750/mt (RUB 52,000-54,000/mt) CPT.
On exports, the most recent talks have been handled in Turkey at around $550/mt FOB from one Russian mill and at $525-540/mt FOB from another. Taking into account the declining trend in Turkey’s local HRC market, buyers are aiming to deal at closer to $500-515/mt FOB. Egyptian market has been discussing higher prices, such as $580-590/mt FOB, but dealing with this market is connected to a lot of local financial issues in addition to Russia’s sanctions-related challenges. In Asia, according to the market information, some talks have been there at $580-600/mt CFR which translates to $520-540/mt FOB maximum.
Clearly, while the domestic demand is there, selling sheets at higher prices is better for Russian mills. In addition, the local sales are not related to the numerous problems, faced by Russia due to the sanctions. Moreover, the livelier domestic sales have let them increase the capacity utilization rates – for Severstal to almost full capacity, for MMK to around 70 percent, and for NLMK to around 80 percent, SteelOrbis has learned. However, in the fall the situation might change as seasonally a weaker local demand is expected in late October and November. The supply will be also less due to the scheduled maintenance works at Severstal and, according to the market sources, at MMK.
As a result, unless there is a collapse in the domestic market, which is not excluded by some of the market sources, Russia is not expected to be aggressive in terms of export flats sales in the short run. Recently, the Russian government has announced an initiative to support flats exports via a preferential financing system, however, the local players mainly do not expect much of it. “It is a motto, in the reality, there is nothing there. It might help with credit lines instead of Eurobonds,” a source told SteelOrbis. “It will help in terms of credits for investment in order to support fixed assets, but it will not help to maintain the daily operations,” he added.