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Steel billet and slab prices surging in East Asia - TEX Report
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Friday, 24 Dec 2010

TEX reported that transaction prices of billets for export are surging in East Asia for products from Japan's major integrated steelmakers, with an upswing of USD 40 per tonne so far in a short period. As a result, export deals are viewed as negotiable at USD 580 per tonne FOB, a price that borders on USD 600 per tonne CNF. The environment is expected to bring a sudden rise in slab prices as well.

In the background, various electric steelmakers in Asia have stopped offers of their billet exports amid a considerable advance in prices of raw materials such as ferrous scrap. In this connection, the USA's ferrous scrap prices have shot up since the beginning of December. As a result, various billet users in Asia have reacted with hasty inquiries for imports of billets from Japan's major integrated steelmakers.

In northern states of the USA, the snowfall hit 13 centimeters in the Chicago area December 5th 2010. As a result, the collection of ferrous scrap cargoes across the northern states whereby ferrous scrap prices surged. Besides, export prices of US ferrous scrap for Asia have moved up this week to a level of USD 450 per tonne CNF for delivery in China and elsewhere, an advance of USD 30 to USD 35 from what was settled at the end of November.

Various electric steelmakers in Asia find it difficult to negotiate futures deals of billets as they see enhanced signs of a further advance in ferrous scrap prices. Accordingly, they favor taking a wait-and-see stance. Under the existing circumstances, Japan's major integrated steelmakers find themselves flooded with overseas orders for what they produce as billets.

With a surge in billet prices, there is a growing possibility that slab prices will turn up from a hitherto slack level. As far as slabs go, large contract buyers in South Korea, Taiwan and Thailand still hold large stocks. There is an environment that will bring signs of tight supply-demand conditions for slabs when the new year has arrived. For the main factor, steelmakers in Russia and Ukraine look set to give priority to exports of finished steel products like HR coils over the slabs they export. It is understood that the Russian and Ukrainian steelmakers see rising demand for steel products in the Middle East, where transaction prices of items such as HR coils and hot dip galvanized sheets for consumer electronics indicate an advance of USD 30 to USD 40 per tonne for January shipments, compared with the levels of November. It is considered certain that the transaction prices will further go up.

If a trend toward finished steel exports takes hold, there is a possibility that slab suppliers will disappear. At present, slab exports out of Brazil to Asia are on hold. At Vitoria, a principal port of shipment for Brazilian slab exports, two shiploading facilities collapsed in a sudden gust of wind in late November. But the damaged shiploading facilities have yet to be restored. In Japan, there is a case of blast furnace trouble at the works of a certain integrated steelmaker, which remains to affect slab exports out of Japan to Taiwan.

All things considered, there is a possibility that supply sources of slabs will suddenly dwindle in Asia. Meanwhile, China's major integrated steelmakers such as Baosteel Co are expected to execute more domestic price increases of various products fro February shipments than ones for January shipments. There is strong speculation that prices of various steel products may shoot up then in Asia as a whole. Therefore, slab users are bound to face an environment in which to secure what they require in haste.

It is unclear what price level goes with slabs for supplies into Asia because various customers have large slab stocks and offers are nonexistent of slabs from nations such as Brazil and Russia. In November, the going slab price was reported as USD 550 per tonne CNF. Given the November price, there are forecasts that negotiations on new deals of slab supplies into Asia will start at a price level of USD 600 per tonne FOB at one stroke.

Meanwhile, it is a matter of time before transaction prices of HR coils move up to a level of USD 700 per tonne FOB in Asia once those of semi finished products like billets and slabs hit a level of USD 600 per tonne FOB.

(Sourced from TEX Report Limited)

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