TEX reported that the world's transaction prices of slabs look set to rise further in strong signs of tight supply demand conditions for lack of new offers from various slab suppliers in nations such as Brazil and Russia.

According to information made available in Tokyo, under the existing circumstances, slab exports out of Mexico are on offer to South Korea at USD 830 per tonne CNF for shipments in the April to June 2011 quarter. The offer price would roughly translate into USD 780 per tonne FOB after an assumed freight rate deduction.

By comparison, the existing contract prices are estimated at a level of USD 730 to USD 750 per tonne FOB in HR coil exports out of Japan to South Korea. As a result, it follows that the FOB value of the Mexican slab offer to South Korea this time is higher than the Japanese contract prices of HR coil exports there.

The way Japanese integrated steelmakers see it, the price spread of at least USD 200 per tonne is necessary between slabs and HR coils. Therefore, it is likely that a minimum price level will stand at USD 980 per tonne FOB when the Japanese steelmakers negotiate their HR coil exports for shipments in the April to June 2011 quarter.

In this connection, the Japanese steelmakers are expected to seek prices of USD 1,000 per tonne FOB or beyond in negotiations on their deals of HR coil exports to South Korea for Q2 shipments. The negotiations are scheduled to start shortly.

(Sourced from TEX Report Limited)