UK raw mats imports slip amid steel challenges, Brexit

UK imports of coking coal and iron ore fell in the first quarter, as multiple headwinds built in western Europe's steel industry and ongoing Brexit uncertainty hit the pound.

Coking coal imports totalled 622,004t in the first quarter, down by 21.2pc year on year, according to trade data. March imports were up by 46pc from the previous month at 254,660t, but down from 383,292t a year earlier.

Volumes from Australia revived in March, hitting 125,147t after dropping to zero in February.

March imports from Russia were roughly flat on a year earlier at 71,500t, but volumes from the US fell by 58.6pc year on year to 55,098t.

The UK's met coke imports fell to a six month low of 4.8mn t in March, of which almost 2mn t came from Poland. But the drop may have been fuelled by particularly high met coke imports in January-February, leaving March requirements low. Total first quarter met coke imports came to 67,520t, up from 14,108t a year earlier.

The UK did not receive any Colombian met coke in March, but took a combined 43,166t in January-February, compared with none in the first quarter of 2018. Trade data does not show any Chinese met coke arriving in the UK since December.

UK crude steel production actually rose in the first quarter, by 7.5pc to 2mn t, according to the World Steel Association, of which Argus estimates that around 17pc would be produced through the EAF route. But slipping raw material imports during the period potentially point more towards second quarter steel production plans, and growing caution about the regional steel outlook. European coking coal market participants have described a cautious approach to restocking since late-2018, with mills keen to see how steel fundamentals develop before committing to much extra supply.

UK flat steel market participants voiced uncertainty about the direction of their market throughout the first quarter, with a lack of clarity about Brexit, steel demand, pricing and the pound's volatility all encouraging more hand-to-mouth buying.

The Argus weekly ddp West Midlands assessment for hot-rolled coil is at £447.50/t today, down by £45/t since mid-February.

Brazil iron ore volumes fall away

The UK's iron ore imports totalled 518,351t in March, up by 6.7pc from February but a steep drop of 43.5pc from a year earlier.

And volumes from Brazil — which sometimes account for as much as half of the UK's monthly iron ore imports — fell to zero in March, in the wake of mining firm Vale's fatal tailings dam collapse at Brumadinho in late-January.

"Tata Steel and British Steel have been moving from high-grade blends and using more medium-grade material," a market participant said, adding that it remains to be seen if this situation will persist but that their supply issues will continue to be affected by the disruptions to Vale's medium-lower grade production.

The UK received 153,489t of iron ore from Sweden in March, roughly flat on February but a 50pc drop from March 2018.

Imports from Australia and Canada hit three month highs in March of 116,102t and 223,603t, respectively.

The disruptions to Vale's pellet supply are opening opportunities for high-grade lump and other pellet origins in the UK. Tata Steel UK received some high-grade iron ore lump from Canada last year, according to a source close to the deal, who added that there may be potential for more shipments this year. And in late-March, a 66,000t cargo of Indian pellet left New Bangalore port bound for the UK.

A trader noted that European imports of Indian pellet remain fairly low in frequency but are now a steady feature, as a couple of European mills attempt to fill the supply shortfall.

As yet, European bookings of Indian pellet are taking place on a spot basis with a price relationship to cfr China indexes, and no long-term supply deals for Indian pellet have yet been seen in Europe, the trader said.

The Argus weekly cfr Qingdao assessment for Indian pellet with 64pc Fe and 2pc alumina is at $126/dmt, up from $123.50/dmt at the end of April.