Asia has not yet given a ride – Kommersant

Russian steel slabs and square billets are getting cheaper on export markets. Slabs fell in price by 20% over the month, and billets – by 5.5%. The reason was a drop in demand. In Europe and Turkey, prices are falling, and against this background, Russian metallurgists are trying to sell products to Asia, where the cost has become historically lower. In addition, the appearance of cheap rolled products from Asia in Europe puts pressure on prices. Nevertheless, according to analysts, Russian metallurgists will be able to maintain positive profitability as long as rolled products cost more than $400 per ton.

Export prices for Russian semi-finished products declined in April due to lower demand. Thus, steel slabs fell in price by 20% over the month, to $424 per 1 ton on the basis of FOB Black Sea, follows from the review of metallurgical products by Metals & Mining Intelligence (Kommersant is available). For the week from 17 to 24 April, the decline was 28%, which was caused by the growth in the supply of slabs to Asia, the review says. The price of a square billet fell by 5.5% to $543 per 1 ton.

Slabs are getting cheaper both in Europe and in Turkey. In China, the quotation of a slab in the last week of April is $460-470 CFR against $470-480 CFR a week earlier, in other Asian countries – $490-500. The Russian slab is shipped to Asia, including through the ports of the Black Sea — at the end of April, several such deals were concluded.

In the square billet market, consumers are still not interested in large orders and only small quantities of material are contracted. Prices here remain under pressure from two main factors: lower prices for scrap imported to Turkey and relatively weak sales of finished steel in export destinations.

Metallurgical companies do not give official comments. A source among companies says that there is a general trend in the market for a decrease in prices for semi-finished products and finished products in the face of cheaper raw materials (iron ore, coal, scrap). According to him, since shipments are now going through the Black Sea to Asia, and not only to Europe and Turkey, as before, prices on this basis are under pressure: steel in Asia has historically been traded cheaper than in Europe, and for Russian suppliers there is a netback worsened by high transport costs for deliveries from the Black Sea ports. In addition, prices were additionally impacted by changes in global commodity flows, with an increase in the supply of low-cost steel from Asia to target markets for slabs in Europe. The interlocutor of “Kommersant” noted at the same time that prices, although they are really decreasing, have not fallen by 30% in a week for any product.

The level of profitability of metallurgists is at an acceptable level when compared with 2018-2019, Deputy Minister of Industry and Trade Viktor Yevtukhov said in April. “Of course, the level is somewhat lower than in 2021 and partly in 2022, when export duties, excise tax on steel and MET were introduced, but still allows metallurgists to work in plus,” the official said, noting the dynamics of net profit from companies in the industry. Viktor Evtukhov also stated that the profitability of the metallurgical business depends on whether a particular company is independent in terms of basic raw materials. At the same time, prices for coking coal in the domestic market rose by 30% in April to 13.5 thousand rubles. (see Kommersant dated April 27).

Now commodity prices are under pressure from the negative dynamics of the oil market, where the downward trend will continue until autumn, says Sergey Grishunin from the NRA. “The second negative moment for the industry was the reduction in the rush demand from the Turkish construction sector, which was buying up rolled products after the January earthquake,” he said. Nevertheless, in his opinion, with prices for rolled products above $400 per 1 ton, Russian metallurgists will be able to work with positive profitability, so the industry must endure the current price reduction.

Evgeny Zainullin