Russia-based flats producers have been feeling more and more pressure on their export sales due to the effect of international sanctions, making it difficult for them to find buyers, vessels, insurance, means of receiving payment, etc. Still, despite all this trouble, the mills have been aiming to increase their allocations for the overseas markets, since domestic demand and pricing for flats have also been falling. As a result, Russia is active in hot-rolled coil (HRC) and steel slab offers to several regions, but is forced to sell at much lower than the market price due to the risks buyers have to bear.
According to sources, in the domestic market in Russia the prices for hot-rolled sheets are now at RUB 76,000/mt CPT, down [JF1] RUB 4,000/mt over the past two weeks. And though the US dollar equivalent actually increased over the same period due to the stronger currency (by $27/mt to $983/mt CPT based on $1 = RUB 64.4), the suppliers still refer to the situation as a negative one. “In Russia the local prices are not tied to the global ones and the value of traders’ stocks is in roubles, the same as our costs are,” a mill said. Other sources report that the general volume of flats sales in Russia’s domestic market has been steadily decreasing, while stocks are still high. “There is a decline in light vehicles production, but it is not the biggest consuming sector. Construction is going down. New projects are not launched yet for obvious reasons,” a source mentioned.
The above situation makes producers seek more opportunities to sell materials abroad either as steel slab or HRC. However, export operations are limited by the earlier mentioned sanctions, very lower prices, and the currently strong rouble exchange rate. “Our targets to sell for export increase, but the prices and currency are putting pressure on costs,” a source said. Still, Russian producers are quite active in trying to export, targeting Turkish and Asian markets first of all.
Particularly, there has been a recent transaction for around 30,000 mt of HRC to India at $710/mt CFR. Earlier, another Russia-based mill was offering $700/mt FOB Nakhodka to Vietnam, though there were no takers. In Turkey, where flats prices have been collapsing, Russia’s offers are under pressure. One of the mills has been indicating $820/mt FOB while another voiced $800/mt FOB and did not exclude the possibility of a decrease to $750/mt FOB. “I think the limit is around $600-650/mt FOB, because it is getting close to their costs,” a trader told SteelOrbis.
A lot of market players are trying to estimate the possible monthly HRC export allocation from Russia. According to the market information, MMK is able to produce up to 500,000 mt of HRC per month, but now the output is reduced due to maintenance at its reheating furnace. Severstal is able to produce 250,000-300,000 mt of HRC depending on the utilization rates of its pipe and sheets producing assets. NLMK can manufacture around 100,000 mt of HRC per month but in addition to that it can give another 100,000 mt as cut sheet. As a result, according to some evaluations, up to half of the volume might be targeted for export, but a lot will depend on the production rates, which might be slowed down due to the negative market.
Along with the HRC, mills have been selling slabs. The most recent price to China from the Russian mill based in the Far East has been reported at $615/mt CFR, while an earlier concluded deal was done at $620-630/mt CFR. “I doubt we can even receive $615/mt CFR now, we will have to go much lower it seems,” a seller said. Another Russian mill targets around $500-550/mt FOB Black Sea in offers to China and $600-700/mt FOB to alternative markets. “It takes at least two weeks to close a deal. Each of them requires all payment and delivery details to be agreed on from scratch. This is delaying the sales process,” a producer said.