Slab trade flows reconfigured amid political shifts

Political developments have largely dictated global slab trade this year, with most sellers inclined to focus on sales to specific regions or customers. CIS exporters are the only ones able to continue selling to most major destinations.

Escalating tensions between China and the US have led to the devaluation of the Chinese yuan, which has had a spillover effect on currencies in southeast Asia, a trader said.

Despite a relatively strong domestic market in China, export prices for a number of steel products have come under pressure from the currency depreciation. Consequently, producers of flats in certain southeast Asian markets have continued to push for lower slab prices.

"Prices for all steel products are softening in Asia, because of the currency devaluation and the rainy season, which is pushing global prices down," a market participant said.

In Iran, new legislation from the Iran Mercantile Exchange (IME) has limited the amount of slab available for export amid strong domestic demand. But prices from Iran have not moved much in the past month, as many buyers are discouraged by looming US sanctions, with latest deals heard at $500-505/t fob for August delivery.

"Thai customers would buy from Iran, as prices are quite low and they are not bothered by the sanctions," a trader said.

Certain CIS producers have not been willing to lower their prices in July. A major seller concluded a sale at $545/t cfr Indonesia earlier this month, which, one trader said, would still be achievable. Another producer participated in the Indonesian tender, but its offer was around $560-565/t cfr. The same seller was heard to have sold to Mexico in July.

Some of the largest Russian producers have limited slab quantities to sell on the spot market in July and August, market participants said. But a mill in the disputed territories of eastern Ukraine was heard offering slab to buyers in Thailand on par with Iranian prices on an fob basis.

But there are not many buyers willing to purchase from that mill because of political tensions. Another Ukrainian seller is active in Europe, where it last offered at $550/t cfr Italy last week.

"Demand for flats in Europe has not been as strong as expected after the safeguards, and the market was quite slow this month. I do not see much improvement for August either," a trader said.

"Some CIS suppliers have tried to push for higher slab prices, but it did not work," the same trader said.

Levels in Turkey heard this week were around $540/t cfr from CIS suppliers, and market participants agreed current slab prices are around $520/t fob Black Sea. The Argus weekly slab assessment edged down by $2.50/t yesterday to $520/t fob Black Sea.

Brazilian slab sellers have not been active elsewhere apart from the Americas, market participants said. Brazil is the only major merchant slab producer that can continue to sell to the US because it is not subject to steel tariffs there. Instead, Brazilian producers face an annual quota to the value of 3.5mn t for semi-finished products, of which they have already filled 1.64mn t in the first half of this year.