The key issue discussed in the hot-rolled coil (HRC) market this week has been Russia’s military invasion of Ukraine’s territory, which, among a number of negative effects and the direct threat to people’s lives, will also have an impact on the flat steel market.
Ukraine, the principal HRC exporter in the Black Sea/Azov Sea region, is now out of the market, being unable to ship any material due to the seizure of ports during the invasion. Earlier, Metinvest announced it was suspending production at its assets located in Mariupol region, at Ilyich and Azovstal. Specifically, Ilyich is a large producer and exporter of HRC and other flats. Zaporizhstal, located in the centre of Ukraine is operating, but market players say the mill is not able to ship abroad anyway due to port issues. Accordingly, it is believed that buyers of Ukrainian HRC will not be able to either receive their previously booked tonnages or deal with the mills for future deals. In the meantime, Russia’s NLMK will traditionally have around 20,000-30,000 mt of HRC for export in April, while MMK is expected to be back in the market only with May production. However, a lot of market players are cautious in their evaluations regarding working with Russia, as it seems to involve a lot of financial and operational risks for now.
In the European market, where prices have increased by €20/mt on average in the past week, to €950-1.000/mt ex-works depending on the region, overall demand and mills’ positions are firm. However, sentiments and production are already affected by the consequences of Russia’s invasion. According to sources, a lot of EU flats producers, specifically HRC and plate producers, have stopped offering as of yesterday, February 24, citing slab supply uncertainty and possible issues with natural gas supply and pricing. Some of them, specifically in Italy, which is a large buyer of slab from Ukraine, have already started to look for alternatives. According to sources, around 40,000 mt of slab has recently been booked from India.
Turkey’s HRC market has been relatively stable this week with domestic prices ranging at $950-980/mt ex-works and imports being at $910-930/mt CFR, but the offers are nominal. The market is concerned regarding under-receiving volumes from the CIS, specifically from Ukraine, given the recently announced production suspensions and the halt of port operations due to Russia’s military attack. Sources expect that the only sources who could cover for the missing ex-Ukraine HRC volumes and the overall expected supply shortage are the Asian mills.
Indian HRC exporters have not been very active in exports considering that a number of mills have been holding back from active offering, waiting for further momentum in trade conditions. Although Indian exporters have been interested in further pushing up prices, ex-India HRC prices have remained firm at $860-870/mt FOB. Though higher levels at $875-885/mt FOB have been expected by mills, given good tradable prices in Turkey, the MENA and the EU. Besides, many Indian mills have not finalized export allocations for the first quarter of the new financial year, which starts in April.
In Vietnam, suppliers have continued to keep HRC import prices highs, while most Vietnamese customers are still focused on negotiations with local sellers and some Chinese traders who have kept offering position cargoes at the lowest level among all foreign suppliers. In particular, most ex-China SS400 HRC offers are at $820/mt CFR Vietnam, while customers’ bids have already decreased to $810/mt CFR and even to $800/mt CFR. Offers for ex-China SAE1006 HRC have been heard at $850-860/mt CFR Vietnam this week. Meanwhile, other foreign suppliers have resisted any drop in price. Thus, the latest offer levels from Indian mills have been reported at $910-920/mt CFR, the same as last week, while Japanese suppliers have not given a new offer price this week. Their latest price was at $950/mt CFR Vietnam last week.
In China, export prices for boron-added SS400 HRC from large mills have remained mainly unchanged at $815-830/mt FOB for April shipment. At the same time, the tradable level for SS400 HRC has been heard at $790-795/mt FOB, with the lower end of the range increasing from $785/mt FOB last week. Several deals from traders with positions have been reported in Vietnam and Pakistan this week at the abovementioned levels. Domestic HRC prices in China, which were showing some signs of a recovery at the beginning of the week, have dropped again by the end of the week to RMB 4,845/mt ($767/mt) ex-warehouse on February 25, down by RMB 65/mt ($10/mt) as compared to February 18, according to SteelOrbis’ data.