The cycle of slabs in nature

Large batches of slabs from India and China began to arrive in Europe, the volume of deliveries has already exceeded the values ​​of previous years. Import became possible after the suspension of metallurgical plants in Ukraine and a decrease in the supply of slabs from there to the European plants of Rinat Akhmetov’s Metinvest. In the meantime, Russian rentals, ousted from Europe by sanctions, are looking for ways to the Asian markets. However, according to analysts, the decline in prices for rolled products in recent months makes the supply of slabs from Asia to Europe unprofitable.

China and India set a record for annual exports of steel slabs to Europe in eight months of 2022. According to Eurostat, India exported 114 thousand tons of slabs to the EU (in 2021 – 95.6 thousand tons). The volume of Chinese exports is 329 thousand tons of semi-finished products (1.7 thousand tons in 2021). Large deliveries from these countries began in July-August, and Italy became the main recipient country.

China and India are non-traditional suppliers for Europe, although Asia is the leader in exports and imports of steel semi-finished products. However, these operations are mostly within the macro-region with little sales outside of Asia. India, according to the BCS report, is the largest exporter in the region with a volume of 5 million tons per year, while China, together with Taiwan, imported 17 million tons of slabs in 2021.

The metallurgical plants of NLMK Vladimir Lisin and Metinvest Rinat Akhmetov are located in Italy. The Russian asset runs on scrap, while Metinvest’s local plants Metinvest Trametal and Ferriera Valsider SpA run on imported slabs. Historically, these enterprises received slabs from the Ukrainian plants of Metinvest, but after their shutdown, the Ukrainian company is forced to look for alternatives, since Russia and Ukraine account for 80% of slab imports to the EU.

Russia is also looking for supply options. Slabs, despite their importance for European metallurgy, are included in the sanctions package, albeit with an important exception. Until September 30, 2024, Russia can annually import no more than the 2021 level of 3.7 million tons. This more than covers the needs of NLMK, which imports 2.4 million tons of slabs to its European plants.

Against the backdrop of the EU embargo on imports of rolled products, Russian companies are looking for opportunities to supply semi-finished products, as well as redirect exports to other markets. The new forecast for the socio-economic development of the Russian Federation states that in January-May 2022, the export of semi-finished products increased by 26.5%, to 7.7 million tons. China, according to the data of the customs of this country, has already purchased a significant amount of slabs from Russia – 1.3 million tons in eight months of the year against 249 thousand tons in 2021. However, due to low prices and expensive logistics, the profitability of these deliveries cannot be compared with exports to Europe. If in peacetime the route from the plant to the ports of the north-west or south of the Russian Federation was about 1.5 thousand km, then to the Far Eastern ports it is 9 thousand km to go through the overcrowded Eastern training ground.

Deliveries of hot-rolled steel from Asia to European ports are carried out at a price of about $630 per ton on a CFR basis, says Boris Krasnozhenov from Alfa-Bank. According to Kallanish, the expert notes that the price of hot-rolled sheet in Italy from local producers is about $700 per ton on an EXW basis. “Given the current prices for iron ore, scrap metal, coking coal, as well as transportation costs, it is difficult for Chinese slab suppliers to maintain a positive margin when delivering to Europe. It is possible that certain volumes of slabs come to Europe from Asia under contracts concluded in the second quarter at higher prices,” Mr. Krasnozhenov believes. Thus, in March of this year, a slab in European ports cost $1,050 per ton on a CFR basis.

Evgeny Zainullin