By the end of this week, new information about ex-Russia slab deals to China has been disclosed to the market, making the total volume booked over the past two weeks hit and maybe exceed around 300,000 mt.
In addition to the deals by NLMK, Severstal and Evraz at $680-700/mt CFR reported by SteelOrbis earlier, there were two more deals by a Russian mill closed around mid-April. According to sources, the transactions for 43,000 mt of slab each were sold to China at $673/mt CFR. Some of the market players assume the sales may have been closed by MMK, which normally does not export slabs but is a large Russian flats producer. Currently, the company has one of its reheating furnaces under maintenance, and so its hot-rolling capacity is not fully utilized and in theory MMK could have given excess slab tonnage to the export markets. Another issue is that MMK seems to have failed to sell its HRC to Asia, particularly to Vietnam, as the latest $750/mt CFR offer was not accepted, partly due to sanctions-related risks. Accordingly, the company could have chosen to focus on slab sales instead.
Aside from the Evraz mill which is based in Russia’s Far Eastern region and used to be a regular seller to Asia and China, other producers are located in distant areas of Russia and have to organize additional logistical processes. According to sources, NLMK, MMK and Severstal will pay around RUB 7,000-8,000/mt (around $100-115/mt) for inland railway transportation to Vladivostok port. Some mills may consider shipping by sea, but most players think it is less reasonable, given the situation in the Black Sea and the freight rates, which are higher that the local transportation costs.
Russia is expected to continue its presence in the Chinese slab market, since there are companies ready to deal for steel of this origin despite the financial, operational and reputational risks. Moreover, the price which is discussed nowadays is around $670-675/mt CFR for new deals, but a lot will depend on China’s HRC market, which has been trending down recently.
In particular, local ex-warehouse HRC prices in China have dropped by RMB 195/mt or $30/mt to RMB 5,040/mt this week, according to SteelOrbis’ data.
“They were attacking with offers,” one of Southeast Asian buyers said about ex-Russia slabs, adding that procurement is very limited both by very high risks in terms of payments for ex-Russia material and weak demand for semis in the region in general. One deal for ex-Russia slabs to Indonesia was reported by SteelOrbis earlier this week at $740/mt CFR.