Posted on 07 Mar 2022
Already extremely tight merchant slab availability from Russia and Ukraine in recent months has transformed into absolute absence since Russia invaded Ukraine, paralysing CIS trade and leading to wide-ranging sanctions on Russia.
The absence of CIS material is driving up prices, as Turkish and European buyers, “desperate for the material”, are seeking alternatives to CIS supply. Some are finding replacement volumes in Asia, as Brazil continues to supply the US and regional market, but one lot was heard booked in the past week from Brazil. Two Asian lots were also booked, and more could be on the way, according to sources.
Two Italian producers booked Indonesian slab, a 30,000-tonne lot at $850/tonne cfr Italy, and a 60,000t lot at $900/t cfr later in a week. A Brazilian 50,000t lot was heard booked by a Turkish mill at around $900/t cfr, but could not be confirmed by press time.
Although enquiries for Brazilian slab are raining down, the country’s producers will not be able to satisfy the requirements, whatever the price, as they are tied in with US mills. They have been supplying these faithfully for the past five years, since the US Section 232 trade restrictions were introduced. Additionally, US flat product prices are also rebounding, and mills are keen to secure supply, driving up prices.
Traders tell Kallanish Iran could replace some of the volumes in Turkey, but it will take some time. EU mills could also turn to Iran, as the Union mulls the removal of sanctions on hydrocarbons and other products to replace Russian supply.
Although, formally, some Russian mills are still able to sell to Turkey and Europe, financing and logistics are becoming extremely difficult. According to traders, several cargoes are waiting for loading in ports, either searching for a vessel or ways to complete payment, or both. Traders also note the very fast pace of changes understandably affecting western Russian ports, exacerbating the situation further, as buyers and sellers look for ways to complete trade.
Thus far, the sanctions do not appear to be affecting Russian Far Eastern trade, but prices are considerably lower there. A sale of a 50,000t lot was made by a Russian producer at $765/t cfr East Asia. Considering the prices paid by European mills for Asian slab last week, there is around a $70-80/t discount on Russian material right now.
Logistically, it is possible for other Russian suppliers to move their volumes to the Far East, but it would be a lengthy, expensive exercise, “something Russian steelmakers might have to get used to, unless the situation changes quickly and positively for Ukraine”, a source notes.
Realistically, only China could replace lost CIS volumes, another source adds, but it depends on its attitude to both prices and environment. There is already talk of a possible reintroduction of Chinese export duties, if exports of Chinese steel products continue to rise.
In 2021, Russian slab exports amounted to 10.11 million tonnes, while Ukraine exported 4.31mt, both merchant and for re-rolling at US and European re-rolling assets. By comparison, Brazil exported 6.72mt of slab last year and Japan 2.67mt, according to ISSB data.
Source:Kallanish
