Russian HRC producers are still absent in the wide range of export destinations with the possibility of returning in the upcoming round now evaluated even as a minor one, considering the downturn in the MENA region and Turkey. Following months of weak demand, the domestic market has finally reacted to seasonal factors and mills have been able to increase the workable prices in local sales, as well as in trades to the nearby CIS countries. Moreover, even sales to Iran have been less lately as the workable prices at the destination are not high enough for Russian mills under current market conditions. It is worth mentioning that the ongoing widespread fuel supply crisis, currently seen across Russia, is not yet having a heavy toll on the cargo transportation. Sources mention that, at least for now, the automotive routes are affected, while cargo transport mainly uses diesel as a fuel.
The latest deals in the domestic market for HRS in Russia have been reported at RUB 61,000/mt ($645/mt) CPT for thin material, while thick and wide sheets have been sold at up to RUB 65,000/mt ($687/mt) CPT. The mills are now in the market to sell for July production, and plan to announce the official August offers in around 10 days. Many domestic market players are expecting the prices to increase moderately as the demand is to remain at seasonally high levels. The latest retail prices for HRS have been reported at RUB 58,500-60,000/mt ($620-635/mt) CPT.
Over the past two weeks, the local HRS prices for thin material have increased by RUB 1,000/mt from the lower end from mills and by RUB 500-1,000/mt from traders. However, in US dollars, considering the drop of the exchange rate from $1 = RUB 72.3 to $1 = RUB 77.5, the price levels have dropped by $30-40/mt and $27-32/mt, respectively. Still, even with this decline, domestic workable prices in US dollars for sheets are much higher than the levels, potentially reachable for Russian mills in the distant markets for cargoes to be shipped from the Black, Baltic and even Caspian Seas. “Local production cost is in local currency, therefore for the mills export prices rise if rouble rate drops,” a market player commented to SteelOrbis. “Local currency is much overpriced even now, the costs rise each year. Even these [the current] rouble prices are not enough to work with normal profit,” a source added.
For now, Russian mills continue to stay away from exports to the previously regular overseas destinations – MENA and Turkey. According to SteelOrbis estimates, with the latest quite sharp price drop seen in the HRC segment of Turkey, and with the lately announced country specific quotas (CSQ) by the EU, the workable ex-Black Sea prices for Russia would hardly exceed $540/mt FOB for non-sanctioned material and at approximately $500-505/mt FOB for the sanctioned one. In the Baltic Sea, the workable HRC price from Russia is estimated at $490-500/mt FOB for the sanctioned material.
While Russia has been staying away from HRC exports to Turkey and MENA region for a couple of months now, recently the volumes sold to Iran has been also declining. One reason is the slightly lower amount of orders from Iran along with the workable prices being lower than sales from Russia to the alternative destinations. “With the price of $550-570/mt FOB Caspian Sea the supply [from Russia] will be limited. Half of CIS countries would pay higher than that. First the local and CIS demand will be evaluated, the rest of the volumes to be directed to Caspian,” a market source told SteelOrbis.
Local prices in RUB include 22 percent VAT.
$1 = RUB 77.5.
