Market players are currently wondering whether or to what degree the price decreases in flat steel products in China, triggered by high stock levels and low demand, will affect export offers from the CIS countries. In China, the flat steel export volume had been on a downtrend since early 2009 as Chinese producers began to focus more on their domestic market. CIS countries, on the other hand, turned their attention to Southeast Asia (historically China's main export market) and to India as demand from the CIS' usual flat steel export markets such as Turkey entered a decline. When comparing the CIS countries' flat steel export tonnages in 2009 to last year's figures, it is observed that CIS flat steel sales to China, Vietnam and India have this year posted a significant rise.
Meanwhile, given the price decrease trend in the local Chinese market and the slackening of demand in the same country, China's flat steel export offers have declined to $510/mt FOB for HRC and we may start to hear lower levels this week. China has started to be more competitive in markets such as India, the Middle East and Iran. For now, although no significant sales have been heard from China, the price downtrend in Chinese flats may enable Chinese flat steel products to enter the Southeast Asia markets again.
Turning to Iran, another important market for the Russian flat steel producers, in last month Russian mills have concluded some deals for HRC at a maximum level of $600/mt CFR, mostly to Iranian mills. However, due to the low price levels of Chinese offers as of last week, Iranian buyers have decreased their firm bids against the levels of $600-610/mt CFR last week. Iranian buyers are now in wait-and-see mode due to Ramadan and are reducing their firm bids under the influence of China.
Russian producers have sold HRC at $550-560/mt FOB Black Sea and CRC at $610-640/mt FOB for September production. On the other hand, Ukrainian producer Zaporizhstal has sold HRC at $540/mt FOB for September production, whereas fellow Ukrainian mill Ilyich is mentioning the level of $530/mt FOB for HRC with advance payment. It is heard that this latter producer is offering higher prices for payments with letter of credit.
It is thought that ex-CIS flat steel exports to Far East Asian countries will likely be influenced by the competitive ex-China offers. In the Far East markets, flat steel market players are following a wait-and-see policy in order to see by how much Chinese offers will decrease. It is thought that the CIS countries (whose sales volume to Southeast Asia may decrease due to the influence of China) may turn their direction to their traditional markets such as Europe and North Africa, in particular to Turkey and Italy, and also to Iran. For now, it seems that the CIS countries may experience difficulties from Chinese offers mostly in the Middle East and in Southeast Asia.
Ukrainian producers' prices for October production material will be revealed more clearly in the coming period. Meanwhile, Russian producers are mentioning the price level of $570/mt FOB black sea for HRC and $650/mt FOB Black sea for CRC for October production. It is thought that flat steel prices may see an uptrend in Europe in September. However, it should be noted that the degree and duration of any price increase in European flat steel will depend on the extent of the resumption of production in Europe and also on the extent new production capacities and the Chinese offers gain a foothold in the European markets