Orbis HRC CIS Export Forecaster - January 2017

 

What happened in the last 3 months?

October-December 2016 HRC CIS Export Prices

 

HRC CIS Export

Quality : Prime newly produced hot rolled steel sheet in coil as per DIN EN 10025, S235 JR or equivalent commercial grade 
Thickness : 2.00 mm 

Width ≥ 1100 mm 

Delivery Term: FOB St L/S/D
Location: Main Ukrainian and Russian Black Sea ports 

Weekly price movements of different steel products and grades in major markets can be viewed comparatively in the SteelOrbis Historical Steel Prices section. Market trends can thus be seen more clearly, while desired charts can be created and used in reports or presentations.

All charts included in the Orbis HRC CIS Export Forecaster are for HRC FOB CIS prices, while prices and charts for other flat steel grades and regions can be found on our website.

 

Summary:

  • Ex-CIS HRC prices move up in October

HRC production costs moved up rapidly in October since prices of scrap and iron ore had started to increase and also due to the ongoing upward trend of coking coal prices. Amid these higher production costs, CIS-based HRC producers raised their offers to their target export markets.

  • Ex-CIS HRC prices rise sharply in November

In November, CIS-based HRC suppliers’ main competitors, the Chinese HRC suppliers, continued to focus on their domestic market, remaining aloof from competition in the global market. With China not adopting a competitive pricing policy in the global market, demand for ex-CIS HRC recovered, while ex-CIS HRC prices rose sharply because of the increases in prices of scrap and iron ore observed up until the middle of the month. Ex-CIS HRC prices continued to move up throughout the month.

  • Ex-CIS slab prices continue to rise

During the month of November, ex-CIS slab prices increased by an average of $37.5/mt on the back of higher prices of both raw material and ex-CIS HRC.

  • Ex-CIS HRC prices continue to move up in December

Ex-CIS HRC suppliers continued to increase their export offers in December as well, since they did not face any competition in the global HRC market and as iron ore prices maintained their upward trend until the middle of the month.

 

 

December: Forecast vs Actual Situation

HRC CIS Export Prices

In the Orbis HRC CIS Export Forecaster for December this year, we had predicted that prices of and demand for ex-CIS HRC would maintain their strength since Chinese HRC suppliers - ex-CIS HRC suppliers’ main competitors in the global markets - would continue to direct their sales to their domestic market, where demand is at decent levels. Throughout December, ex-CIS and Chinese HRC prices moved in line with our predictions and the deviation between our forecast price and the actual price for ex-CIS HRC as of the end of December was only two percent.

The conditions which impacted the CIS HRC export market in December are as follows:

  • Chinese domestic HRC prices first move upwards, then soften

Against the backdrop of low HRC inventories in the Chinese market at the beginning of December, prices in the local Chinese HRC market increased sharply in the first two weeks of the month due to tighter supplies amid new environmental protection measures which halted production at intermediate frequency melting furnaces, as well as due to other ongoing production cuts and the uptrend of the Chinese futures market. However, domestic HRC prices in China switched to a downward trend as of mid-December, as Chinese steel futures prices started to soften and as some traders reduced their prices in order to increase cash flow before the new fiscal year. Despite the reductions in prices in the second half of the month, prices in the local Chinese HRC market rose by a total of 0.8 percent during December.

  • Chinese HRC prices increase throughout December

Chinese HRC prices, which had been rising steadily since October, continued their upward movement in December. Due to low domestic HRC inventories and the strong domestic demand supported by the optimistic sentiment in the Chinese steel market, Chinese HRC suppliers continued to direct their sales to their domestic market and increased their HRC offer prices for the global market. However, in the last days of December, Chinese HRC offers decreased slightly following the declines observed in domestic HRC prices.

  • Ex-CIS HRC prices rise by 2.5 percent in December

In December, Chinese suppliers - ex-CIS HRC suppliers’ main competitors in global markets - did not increase the volume of their HRC offers to the global market and continued to direct their sales to their domestic market. As a result, demand for ex-CIS HRC in the global market remained strong just like in November and ex-CIS HRC prices increased by a total of 2.5 percent throughout December. Although demand for ex-CIS HRC did not weaken and Chinese HRC prices increased, ex-CIS HRC prices increased by a smaller margin in December compared to November due to the sharp declines in global coking coal prices and the downward fluctuations of iron ore prices.

  • Slack demand for HRC in Europe ahead of New Year

In December, HRC demand in Europe was slack due to the Christmas holiday and also as buyers sought to avoid carrying high inventories into the new fiscal year. As a result, the upward movement seen in HRC prices in Europe in November was replaced by sideways price movement in December, though with some slight upticks in prices also seen.

  • Demand for ex-CIS HRC remains strong in Middle East and North Africa

Buyers in the Middle East and North Africa (MENA), who had previously suspended their HRC bookings over a long period in anticipation of a downtrend in prices and then resumed their purchases in November, continued their HRC bookings in December in order to bring their inventories up to normal levels. Even though they usually meet their needs for import HRC from Chinese suppliers, buyers in the MENA region mostly preferred to conclude bookings of ex-CIS HRC in December since Chinese HRC suppliers continued to focus on domestic sales. Accordingly, demand for ex-CIS HRC in the MENA region remained strong in December.

  • Weak demand for ex-CIS HRC in Turkey

As a result of the ongoing political and economic uncertainty in Turkey and the fluctuations in the Turkish lira-US dollar exchange rate, Turkish buyers continued to conclude HRC bookings only to meet their immediate needs and so demand in Turkey for both domestic and import HRC was weak in December.

  • Ex-CIS slab prices continue to move up

During the month of December, ex-CIS slab prices increased by an average of $30/mt in total on the back of higher global prices of HRC.

  • Iron ore prices continue to fluctuate

Just like in previous months, global iron ore prices moved in line with the ups and downs in the Chinese futures market and continued to fluctuate throughout December, even though global coking coal prices declined by $47/mt on average during the month as buyers reduced their bookings considering prices to be on the high side.

  • Turkish mills forced to raise scrap purchase prices in second half of December

In December, Turkish mills tried to put pressure on scrap prices by reducing their demand; however, they had difficulty in finding scrap offers at their desired price levels. As a result, after the middle of December they were forced to accept increases in scrap prices.

 

 

What is our expectation for the next 3 months?

HRC CIS Export Prices

 

Assessment of semi-finished and finished steel market

  • Sentiment to remain positive in Chinese domestic steel market

The positive sentiment in the Chinese steel market - resulting from ongoing domestic production cuts and the recovery of the national economy - has gained further strength with China's chief government forecaster stating that Chinese steel demand in 2017 will decrease less than previously anticipated. Even though domestic HRC demand has fluctuated occasionally, it is not expected to indicate any sharp declines, while at the same time supply is on the tight side. Accordingly, sentiment in the Chinese domestic steel market is expected to remain positive in the short term. 

  • Chinese HRC suppliers to continue to focus on domestic market

Before the Chinese New Year holiday (Jan. 28-Feb. 2), Chinese HRC suppliers are expected to continue to direct their sales to their local market against the backdrop of domestic production cuts, instead of competing with foreign suppliers in the global markets.

  • Buyers in MENA region expected to exert pressure on ex-CIS HRC prices

HRC buyers in the Middle East and North Africa (MENA) region built up their stocks by increasing their bookings in November and December and so now they have no urgent need to increase their stocks in the short term. Accordingly, buyers in this region are expected to exert downward pressure on ex-CIS HRC offers. 

  • Turkish demand for ex-CIS HRC to remain weak

Entering the New Year, economic and political uncertainty is still observed in Turkey, while buyers are still cautious about concluding new bookings. As a result, demand for ex-CIS HRC in Turkey is expected to remain weak as buyers are expected to continue to make bookings only to meet their immediate needs.

  • Ex-CIS slab prices not expected to soften

As the New Year begins, iron ore prices are still strong despite fluctuations, while ex-CIS HRC prices have continued their upward trend. In these market conditions, ex-CIS slab prices are not expected to soften in the short term.

 

Assessment of raw material markets 

  • Iron ore prices expected to continue fluctuating trend in short term

Even though iron ore demand in China is expected to decrease due to production cuts at steel mills in northern China within the scope of environmental protection measures, iron ore prices are on the rise since the production cuts are considered to be a positive development in terms of ensuring a supply-demand balance in the steel market. This provides support for the upward movement of the Chinese steel futures market, which in turn prompts increases in iron ore prices. While global iron ore prices are expected to fluctuate in line with the price movements in the Chinese steel futures market, average iron ore price estimates for 2017 issued by many research companies, investment banks and analysts are in the range of $50-60/mt CFR China.

  • Scrap prices to expected to remain strong in short term

Global scrap prices are expected to remain strong in the coming period, due to the following factors: Turkish steel producers have not completely met their scrap needs entering the New Year, demand in the US domestic market still exceeds supply, European mills will likely step up their demand for scrap having postponed their bookings in December, while the worsening of winter conditions is also a contributing factor.

 

 

More radical scenarios excluded in forecasts

Negative

  • Sudden changes in foreign exchange rates
  • Possible new tax applications and increases in tax rates which would negatively impact global trade
  • Possible new antidumping cases
  • Changes in global economy due to political uncertainties
  • Sudden changes in Chinese and global futures markets

Positive

  • Acceleration of economic improvement in developed countries
  • Easing of political uncertainties in the Middle East region
  • Governmental statements that may directly impact steel production/consumption

 

 

What was the situation in recent years?

October 2013-April 2014 HRC CIS Export Prices
 
October 2014-April 2015 HRC CIS Export Prices 
October 2015-April 2016 HRC CIS Export Prices

2005-2010 HRC CIS Export Prices

2010-2014 HRC CIS Export Prices

2014-YTD HRC CIS Export Prices

 

2011 – YTD Global HRC Prices

 

 

 

Related news

Interpipe starts production of pup joints for oil and gas industry

Wednesday, 21 December 2016 17:00:19 (GMT+3)   -   Istanbul

Ukrainian steel pipe producer Interpipe has announced that it has started the production of pup joints for the oil and gas industry. This product is used for selection of a precise length of casing and tubing strings, when such selection cannot be ensured with installation of a standard length pipe. The company produces pup joints in a diameter range from 60.3 mm to 339.7 mm and in lengths from 0.6 meters to 5 meters, with all types of threads in full accordance with requirements of the international API standard.

Interpipe stated that it has already carried out the first supplies of the new product for Turkish and Ukrainian oil and gas field developments. The company also intends to supply pup joints to customers from NAFTA, CIS, the Middle East, and Africa.

Zaporizhstal's crude steel output up two percent in November

Thursday, 01 December 2016 15:01:12 (GMT+3)   -   Istanbul

In November this year, Ukrainian steelmaker Zaporizhstal's finished steel product output increased by 29.5 percent to 266,300 mt, its crude steel production rose by two percent to 311,900 mt, while its pig iron production moved down by 12 percent to 276,100 mt, all year on year, according to the company's results. The year-on-year decline in pig iron in the given month was due to the stoppage of the blast furnace No. 3 for a large-scale ecological reconstruction with an investment of UHR 1.5 billion ($58.53 million).

In the January-November period, Zaporizhstal saw a 3.4 percent year-on-year decrease in its pig iron output to 3.33 million mt, its crude steel production declined by 1.11 percent year on year to 3.58 million mt, while its finished steel product output rose by 1.6 percent year on year to 3.10 million mt.

MMK joins forces with Gazprom to develop new pipe products

Monday, 28 November 2016 16:50:32 (GMT+3)   -   Istanbul

Russian steelmaker MMK has announced that it has signed two agreements with state-owned gas supplier Gazprom for trilateral scientific and technological cooperation programs with pipe producers TMK and ChelPipe Group.

The programs will run from 2016 to 2021 and will provide mutually beneficial solutions to Gazprom's needs for innovative and reliable pipe products. The programs will focus on developing technology for flat products and pipes from high-strength steel and from steel facilitating usage across a wide temperature range.

The agreements state that implementation of the programs will be aimed at increasing economic efficiency of constructing and operating natural gas production, transportation and processing facilities by Gazprom.

Metinvest: Ukraine’s steel product consumption to rise 25-30% in 2016

Wednesday, 02 November 2016 16:28:53 (GMT+3)   -   Istanbul

Speaking at the meeting of the Interdepartmental Scientific and Technical Council of Ukraine on the Issues of Secondary Treatment and Continuous Casting of Steel held on October 31 in Kiev, Ukrainian mining and steel producing group Metinvest’s marketing director Roman Kurashev has stated that steel product consumption in Ukraine is expected to increase in the current year by approximately 25-30 percent year on year to 4.4 million mt (based on worldsteel methodology).

Mr. Kurashev noted that capacity modernization with a focus on cost reduction and strengthening of product portfolio would help Ukrainian producers to withstand the global challenges. In particular, local companies should focus on the development of products for the domestic market and import substitution, he added. According to Mr. Kurashev, preserving a competitive advantage is possible for Ukrainian steelmakers through the expansion of their product lines with high added value, for example, thin sheet steel (cold rolled, galvanized and polymer coated).

Metinvest’s marketing director also stated that the development of the domestic market is impossible without state policy directed at production revival, stimulus measures for the construction sector, and capital investments.

NLMK increases efficiency of blast furnace operations

Tuesday, 04 October 2016 10:46:45 (GMT+3)   -   Istanbul

Russian steelmaker NLMK Group has announced that it has put its blast furnace No. 6 back into operation after a scheduled overhaul at its main production site in Lipetsk. NLMK stated that the overhaul enables uninterrupted operation of the blast furnace and excellent product quality for the long term. It also increases the maximum output of the furnace by seven percent, from 2.9 million mt to 3.1 million mt per year, while cutting costs.

According to the company’s statement, a new gas treatment system has also been introduced at blast furnace No. 6, which provides a five-fold increase in the efficiency of blast furnace gas treatment.

 

 

 

  


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