Steel News from YK-8.10

Chinese HRC export price slides on slow trade activity

China / Flat Products

Chinese HRC exporters have lowered prices for October shipment products in line with insiders’ expectations amid

weak trading abroad coupled with lower domestic consumption.

Most suppliers from China are quoting HRC (SS400, 3‑12 mm) at $575‑580/t FOB for October shipment this week,

which is $5/t below the last week level, when September shipment material was offered. In particular, Shagang Group

has set its price at $575/t FOB, cutting it down by $5/t for the third week in a row.

The drop is a result of sluggish purchasing activity on external destinations seen during the last two weeks, insiders

say. Besides, local end-user demand for HRC is on the wane as well, with traders’ inventories gaining 2.3% w-o-w,

Mysteel data shows. “Among domestic steel products, only rebar is enjoying high demand at the moment,” a Shanghai

based trader told Metal Expert. Domestic HRC price stopped increasing this week, which could not provide support

to export quotes either.

However, even after the price decline no deals were heard to be done for the Chinese material given worse situation in

the segment domestically. Vietnamese buyers were giving preference to the suppliers from other countries, participants

report. “Several orders were finalized at $595/t CFR Ho Chi Minh for SAE1006 HRC, 2‑3 mm, sourcing from India,”

another Chinese trader said adding that though offers from China for the same specification were coming at almost

the same level – $595‑600/t CFR ($585‑590/t FOB) – he heard nothing about bookings.

On the above, a number of insiders consider that Chinese HRC exporters may provide additional discounts in the near

future, though the decrease is unlikely to be significant due to production cuts in the country.

Iron ore price unmoved on stable steel, trade lull

China / Iron Ore

Iron ore price stabilized Thursday amid unchanged steel price and sluggish trade activity in the seaborne market.

Australian iron ore fines 62% Fe stayed at the yesterday’s level of $69.5/t CFR due to the stable price for Tangshan

billet, while the raw material and steel futures posted slight multidirectional changes. “Steel price has already reached

a very high level, it is difficult for the suppliers to keep pushing it up without losing sales volumes,” a trading source told

Metal Expert. According to Mysteel data, traders’ inventories of five major steel products have not changed significantly

during this week, with comparatively high end-user demand for rebar being offset by higher stocks of all other products.

It is worth noticing that Tangshan billet price was stable during the last two days even though the city announced a

short-term 50% operations cut for sintering equipment and shaft furnaces for August 8‑9 to reduce air pollution.

In the seaborne market, no deals were reported so far as mills still prefer to book small volumes from ports due to

lasting output restrictions. “Prices [for iron ore] are unlikely to continue increasing given a drop of demand,” another

source said.

Meanwhile, the Commonwealth Bank of Australia upgraded the forecast for the benchmark 62% Fe raw material quotes

to $61/t FOB from $56/t FOB for FY 2018‑19 on strong iron ore positions supported by China’s robust steel market.

However, the bank predicted a drop to $53/t FOB in the next FY and to $46/t FOB in the longer term, according to

Australian local press.

VSA: Vietnam’s steel sector needs to import steel scrap

South East Asia / Scrap

Vietnam Steel Association (VSA) insists on cancellation of strict regulations for scrap importers, stating that scrap

imports are highly needed to support the production growth in Vietnam. In particular, without imports, the country could

cover only 40% of demand using local steel scrap.

Following a recent government order to stop imports of scrap, VSA sent a letter to the Ministry of Natural Resources

and Environment, asking to extend and issue new import licenses for steel scrap as 60% of raw material used in steel

production is imported. Besides, VSA stated that making steel from scrap is an environmentally-friendly process, which

will not cause pollution. Meanwhile, the association does not deny the fact that some Vietnamese companies imported

low-quality and illegal scrap into the country back in July and proposed severe penalties for steelmakers who violate

import regulations and cause harm to the environment.

Based on the production capacity of the Vietnamese steel mills, the country needs around 31.6 million t of steel scrap

in 2018‑2020, of which imports account for nearly 19 million t, VSA estimates. According to the General Department

of Customs, in H1 2018, Vietnam imported around 2.6 million t, 20% up year-on-year, as Metal Expert reported earlier.

Purchases of scrap from Japan and the USA, which are the biggest suppliers of the material in Vietnam, went up by

6.7% and 34% compared with the previous year, respectively.

Hoa Phat Group boosts steel production

South East Asia / Billet, Long products, Tubes & Pipes

Vietnam’s producer Hoa Phat Group (HPG) improved steel output in January-July 2018 supported by strong demand

from the domestic and overseas markets.

HPG produced 1.3 million t of steel over the period, around 8% up year-on-year, according to the company press

release. Besides, a market share of HPG increased to 28.3% from 24% last year, despite low demand amid the rainy

season, Metal Expert learnt. The performance growth was supported by high demand from local construction projects

such as Sun Group hotel in Quang Ninh, Da Nang Times Square Project with two 50-storey tower blocks, Hoi An resort

project with casino, hotel, tourism and entertainment complex, etc., according to HPG.

Furthermore, strong demand from overseas markets, namely the USA, Malaysia, Cambodia, supports the solid improvement

in HPG’s performance. In particular, in January-July 2018, the company exported 109,394 t of construction

steel, Metal Expert learnt. Besides, at the beginning of August the company managed to sign a contract for the supply

of 15,000 t of steel bars to Canada, and exported a trial batch to the new market New Zealand, according to the

company’s information.

JSPL doubles EBITDA in Q1

India / Steel Semis, Flat Products, Long products

Indian steel producer Jindal Steel and Power (JSPL) improved financial results in the first quarter of this financial year

(April-June) owing to a significant growth of sales volumes.

JSPL more than doubled a profit after tax to INR 3.3 billion ($48 million) in Q1 of FY2019 compared to the previous

quarter. In the same period of last year, the company posted a loss of INR 1.8 billion ($26.2 million), according to the

JSPL report. EBITDA increased by 119% year-on-year benefitting from favourable conditions in the steel market and

despite high costs of raw materials. JSPL’s sales rose by 46% y-o-y, as Metal Expert reported earlier.

The manufacturer is positive for the full financial year as steel demand, in both global and domestic markets, is expected

to keep rising. However, the effect of trade restrictions, particularly, in the USA and China, is still unknown, the

company stated. In the short term, JSPL is going to improve operational and financial results further. “With capacity

utilization rates running high for most steel producers in the country and with expectations of a muted credit growth,

capacity addition seems difficult in the near term which in turn could keep these utilizations to remain high in future,”

the company stated.

NMDC cuts iron ore production in April-July

India / Iron Ore

India’s state-run mining company NMDC cut iron ore production and sales volumes in April-July due to high prices for

the raw material offered by the producer.

NMDC produced 8.4 million t of iron ore in April-July, a significant decrease of 23.2% year-on-year, according to the

company official information. Besides, sales volumes declined by 27.6% to 8.7 million t y-o-y. The miner’s price was too

high during the period under review and Indian steel producers asked NMDC to revise its pricing policy. In particular,

JSW Steel, a major customer of NMDS, switched to purchases from Odisha, where the iron ore is cheaper, according

to the Economic Times. The miner raised prices by INR 150/t ($2.2/t) in July after almost the same increase in May,

Metal Expert learnt.

Nevertheless, NMDC is going to enhance iron ore production by 21‑27% to 43‑45 million t this financial year and start

steel production by the end of 2018 to improve financial performance, as Metal Expert reported earlier. Notably, the

producer slightly raised profit after tax, by 1% to INR 9.7 billion ($141.5 million) y-o-y in Q1 FY 2019 (April-June), Metal

Expert learnt from company press release.

In brief: Tokyo Steel zooms scrap price

Far East / Scrap

Japanese EAF steel producer Tokyo Steel has announced an increase in its purchase price for ferrous scrap starting

August 10. The purchase price for HMS 2 scrap at Takamatsu works has added JPY 1,000/t ($9/t) coming to JPY 33,500/t

($300.6/t). The same increase has been reported for Okayama and Kyushu works, where the price is JPY 34,000/t

($305.1/t) and JPY 34,500/t ($309.6/t) respectively, Metal Expert learnt. On the other hand, the prices at Tahara and

Utsunomiya have moved higher by just JPY 500/t ($4.5/t), coming to JPY 35,500/t ($318.6/t) and JPY 36,000/t ($323/t)

respectively. The exchange rate is $1 = JPY 111.44.

In brief: Yancoal to restart Austar coking coal mine

Australia / Coal

Yancoal announced that it will resume operation at its Austar coking coal mine in New South Wales, Australia, which was

stopped in early July due to a dispute with the state regulator. In 2017, the company produced 1.9 million t of saleable

coal at this mine, while in April-June the output dropped by 94% to 38,000 t. The Austar coking coal mine produces

premium semi-hard coking coal; the products are shipped through the Port of Newcastle.

Baltic scrap booked below $320/t CFR in Turkey

Turkey / Scrap

Downtrend continues in the Turkish ferrous scrap market. A deal for Baltic material was closed with another price

decrease.

An Izmir-based company purchased HMS 1&2 (80:20) at $318/t CFR, bonus material at $328/t CFR and railway scrap

at $333/t CFR from Russia (Saint-Petersburg) through an international trader. The price for Baltic HMS 1&2 (80:20)

dropped by $4/t.

The price assessment for HMS 1&2 (80:20) from the US East Coast moved to the range of $320‑325/t CFR Turkey

versus $322‑325/t CFR earlier.

Demand for imported scrap increased in Turkey. “There are more buyers around,” a trader told Metal Expert. But bids

are heard at $315/t CFR for HMS 1&2 (80:20) from the USA or the Baltic region. Some exporters of the material hope

that there is no seller at that level. Others decided to left the Turkish market. “There is nothing to do in the Turkish market

until September,” a supplier noted. “We loaded to Turkey, our scrap yard is empty and we don’t plan to sell, because

it’s better to go on holidays,” another exporter commented.

Turkish billet importers still inert

Turkey / Steel Semis

Billet market in Turkey remains dull with only some serious talks heard in the import segment: steel producers prefer

scrap, while re-rollers insist on good discounts.

Import offers remain largely unworkable in Turkey – $510‑515/t CFR for September-October shipments. “This does not

make any sense for Turks, at this kind of levels for rebar billet is not workable at all,” a trader told Metal Expert. Most bids

remain at $500‑505/t CFR which is not acceptable for most sellers, especially producers from the CIS. Some traders,

however, are reportedly ready to negotiate slightly below $510/t CFR for sizeable lots. It is also worth mentioning that

a $490/t CFR sale of around 20,000 t was rumoured in the market, supposedly for the material sold by third parties

through Russia. The information, however, was not confirmed by the time of publication.

Domestic prices for billet in Izmir are set at $515/t EXW, a 10,000 t sale was closed this week at the mentioned level.

In Iskenderun, some mills are ready to deal at $512‑513/t EXW, but no transactions were reported.

Mills in Turkey report an increased number of inquiries in the export billet segment. “There are orders, big quantities

and we cannot offer to all. Philippines, Indonesia, Oman, UAE – they are in the market,” a producer told Metal Expert.

In addition, some negotiations are going on with buyers from Egypt. Overall, Turkey is ready to deal at $510‑515/t FOB

for exports, but customers target levels close to the CIS ones – not higher than $500/t FOB.

Graphite electrodes imports keep trending up in Turkey

Turkey / Slabs, Billet

Positive dynamics of steel semis production in Turkey in January-June 2018 resulted in higher requirements of graphite

electrodes. In addition, having faced a serious shortage of electrodes supply once, the companies now prefer to secure

the necessary volumes even though the deficit of electrodes has reduced.

Imports of graphite electrodes in Turkey increased by 18% to 24,977 t year-on-year over the reviewed period, according

to statistics service SteelData. Stronger crude steel output based on the EAF technology supported the increase,

going up by 11.5% to almost 13.1 million t y-o-y in H1 2018, as Metal Expert reported earlier. Moreover, local mills

preferred to be on a safe side in terms of electrodes supply after the unfavourable situation in the global electrode

market observed at the end of 2017. “Turkish companies are interested in graphite electrodes supplies as they want to

be confident that their production process will be intact,” a market insider told Metal Expert.

Egypt books CIS billet at discount

North Africa / Billet

Egyptian importers made several deals for billets from the CIS, even though the situation in the rebar segment provides

limited support and the prospects are rather gloomy. In addition, some negotiations for Turkish semis are currently

underway.

Deal prices for CIS square billets decreased to $515‑517/t CFR versus $522‑525/t CFR two weeks ago. In particular,

18,000 t of billet for August shipment were marketed at the beginning of the week via a trader at $517/t CFR. 10,000 t

of material for prompt delivery were sold at $515/t CFR, Metal Expert learnt. At the same time, taking into account the

continuous decline in prices for scrap, local importers started to bid at $510/t CFR and even below.

Notably, Turkish semis for September shipments are being negotiated at $525/t CFR with possible discounts from

some suppliers. Iranian suppliers have reportedly been out of the Egyptian market.

Bearish sentiment prevails in the market, as scrap tags continue to slide in Turkey. “I think prices could dip further.

Today customers don’t accept $515/t CFR,” a local trading source said. Moreover, the situation in the Egyptian rebar

market leaves much to be desired.

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