Hot rolled coil (HRC) prices in Turkey have increased significantly over the past week, reflecting the first consequences of Russia’s invasion of the territory of Ukraine. Currently, the local HRC offers in Turkey are at $990-1,020/mt ex-works for May deliveries, up from $950-970/mt ex-works seen early last week. Sources report that deals at this level are already being done and some mills are aiming to sell at up to $1,050/mt ex-works. The key issue is the supply halt from Ukraine and Russia due to the war. The buyers are aiming to cover for volumes which will not be delivered and to secure their tonnages for the future as well. Imports from other sources are also an option, mainly from Asia, but suppliers are seeking the right level at which to offer. The latest prices from China and India were reported at $915/mt and $950/mt CFR, respectively, but they are expected to increase by at least $20-30/mt. As regards exports, there have been some deals closed to Europe and Egypt for high grade materials, at around $960-980/mt FOB Turkey, but new offers are expected to be higher now.
Generally, teel market players believe the absence of Ukraine and Russia from the market as HRC exporters will have a somewhat softer impact on HRC prices, as, for example, compared to the semis and raw materials segments. In the Black Sea/Azov Sea region, even previously MMK was not exporting due to repairs and local sales, and NLMK had limited volumes of around 30,000 mt per month on average. Severstal, the third Russian mill, has been selling to Europe lately around 130,000-150,000 mt per month. As for Ukraine, its sole HRC producer Metinvest supplied over 2 million mt of HRC in 2021, which means around 160,000 mt per month and more. In recent months, ex-Metinvest supply was at normal volumes.
Now when Ukraine cannot export as it is under attack and its production suspended and ports are non-operational, and as Russia will be cut out of supplying steel and raw materials to the international markets due to sanctions, buyers of HRC from the two countries will have to replace these volumes with volumes of other origins. One option is to increase domestic purchases, supporting local mills; another one is to buy from Asia, namely India, South Korea, Japan, Indonesia, China, Taiwan and Vietnam. In addition, in theory there may be supplies from countries which have local HRC production but which have not been active in exports.
While Ukraine will be out of the market for a while since its territory is being invaded, market players are trying to understand the situation with Russia and whether there will be any way to work with the country. Given that the sanctions package is getting bigger day by day, and recently Switzerland has also supported the EU in its measures, it now seems that working with Russia is not an option. “Technically it is impossible [in terms of payments]. All buyers will change or redesign their supply channels accordingly,” a large Turkish importer said.
