Global steel prices a mixed bag in July; currency slides a major influencer

• China raise HRC offers amid positive policy expectations
  
  
• Higher Vietnamese demand also support Chinese prices
  
  
• Russian, Turkish currency slides impact offers
  
  
• Indian mills opt for maintenance, supply uncertainty rules
  
  

Morning Brief: Key global export offers were a mixed bag in July, 2023 with two countries - China and India - showing a slight m-o-m uptick in offers, as per data maintained with SteelMint. In hot rolled coils (HRCs) China's offers rose the most, by over 1.60% to $563/tonne (t) in July 2023 against $554/t in June. India's showed a negligible stir upwards to $570/t ($568/t). Japan's were down by a little less than 1% to $575/t ($580/t) while Russia, on the other hand, struggling with a plunging rouble, showed a 1.20% dip to $575/t ($582/t) in this period.

Turkiye's rebar offers slipped 5% m-o-m to $597/t ($630/t) while Black Sea billets dropped 8% to $474/t ($516/t).

All prices are on FOB basis.

Factors governing global prices in July

Chinese, Vietnam mills lift offers in anticipation of improved demand: Chinese mills raised HRC offers this month in anticipation of supportive government policies and improved demand amid production cuts. For instance, the world's largest steel-maker, Baosteel, raised HRC prices by $14/t for August sales. That apart, there was increased demand from Vietnam, which encouraged the Chinese mills to raise export offers here. In fact, domestic Vietnamese mills Hoa Phat and Formosa Ha Tinh (FHS) had sold out their domestic HRC allocations, which encouraged them to raise their offers for September sales. For instance, FHS raised HRC offers by $10-15/t.

Indian mills decrease export allocations: For Indian mills, this being the rainy season, demand is usually down and is a suitable period for maintenance downtime. This has injected a note of uncertainty in buyers over impending supply disruptions. Mills had lesser material at their disposal for export allocations. In any case, almost all of India's steel exporting geographies remained quiet in July, as has been happening for many months now. Indian mills stopped offering to Vietnam & Middle East amid lowered Chinese offers. Demand from Europe remained tepid after an initial spate of pre-summer restocking. Procurement from the EU has remained slow for months now. If volumes were up lately, this can be attributed to mills fulfilling their pending quotas till June.

Russian rouble tumbles: The Russian rouble recently plunged to a 15-month low, going past 91 to the dollar. While this may be beneficial for Russian HRC exporters, they also need to keep demand firm against the weakened exchange rate in a global economy already struggling with a demand downswing. Therefore, mills lowered their offers in July to keep procurement supported.

The rouble lost 9% in June and has depreciated almost 20% so far this year.

Black Sea billets have been performing poorly especially over the last three months amid dwindling demand from Turkiye, the main buyer. The weakened rouble is also taking a toll on billets demand.

Turkiye struggles against currency slide, low demand: As with the rouble, the Turkish lira has also been sliding sharply. Recently, it weakened more than 2% to a new low against the dollar. The currency has weakened 30% so far in 2023 and this is taking a toll on Turkiye's scrap imports. Being the price setter here, it has been lowering prices significantly since March 2023. Thus, m-o-m, HMS (80:20) prices dropped 4% FOB while rebars slid 5%.

Outlook

Overall, the global longs space will remain subdued in the coming months because the fundamentals are not likely to change anytime soon.

Financing issues because of rate hikes along with subdued longs demand may see Turkiye cutting down steel production in August. The rouble plunge may continue to keep Russian prices under check.

In flats, much depends on Chinese policies, which will govern price movements. For Indian mills, volumes to Europe may drop as the quota cycle has ended in June and sellers will have to wait for fresh ones to re-open. Demand from other markets too is nothing to write home about. Hence, prices may remain range-bound especially since iron ore and coking have been flat this month.