International slab market remains quiet as China sales slow to halt

The international slab market remains quiet, as demand is softening and purchasing activities are low, mainly due to the oversupply of slab and the weakening of the flat rolled market in China.

As China’s demand for automotive, home appliances and real estate investment had been strong earlier this year, steel demand and production had been on an increasing track as well. According to World Steel Association’s (worldsteel) monthly crude steel production report, China had produced over 52.3 million metric tons in the month of August, which represents approximately half of the world’s steel production and is a new monthly high. However, China's domestic steel demand, particularly that for flat rolled, has been slowing since early September, with steel product inventories rising in turn. Meanwhile, exports remain subdued. With such a huge steelmaking capacity and weakened domestic or export demand, China's steel market is now at risk of an oversupply situation.

As China's domestic flat rolled market has deteriorated and domestic prices have declined, slab transactions in the market have slowed to a near halt, and there are currently hardly any slab transaction to been seen in the market. China's excess slab supply and steel market slowdown is starting to impact the slab buying in Southeast Asia as well.

As China, one of the major world slab importers, and Southeast Asia are currently very quiet on the slab purchasing, international slab suppliers are having difficulty selling and slab prices have been declining. The most recent export slab transactions were heard earlier in September, when Russian suppliers were offering slab to the export market at about $445 to $475 /mt FOB.

Meanwhile, in the US, the domestic flat rolled market is still showing signs of strength, but it seems that minimill producers have already purchased their semi-finished materials for the next couple months of production, which could cause some short-term weakening in US slab demand. Furthermore, several North American blast furnaces have restarted production in the last couple months, including US Steel’s Hamilton, Ontario works which produces slabs, and this will eventually add more slab supply to the market. For now, slab supplies in the US market are still somewhat tight.

The latest data from the US Department of Commerce’s Steel Import Monitoring and Analysis (SIMA) system shows that the total amount of slab imports into the US in the month of September (as of September 15, 2009) was 50,552 mt, representing a decrease of 70,792 mt when compared to August. The main slab exports to the US during September are: Japan, at 38,574 mt and Brazil, at 11,978 mt.