The reinstatement of the US sanctions is going to affect Iranian slab exports substantially. Consequently, the CIS producers, primarily Russian, will have a chance to regain market share in Europe and Asia. However, we expect that slab suppliers in Indonesia, Malaysia and Vietnam, which are relatively new and have excess supply than Japanese, would become more active.
The loss of Iran’s slab exports will also be partially offset by less demand, as traditional buyers in Mexico and Indonesia have established captive sources for slab, reducing their participation in the merchant market.
In the US, merchant slab demand is likely to increase, though it will remain small in the context of imports volumes, due to the new 25% duty. Re-rollers are going to buy some volumes from domestic suppliers, which have a surplus to compensate to some extent for the loss of imports. Companies like US Steel and JSW will try to use their idled EAF capacity.
Looking at slab prices, in the third quarter of this year, there would likely to be two distinct markets for prices. We expect the average Asian and the CIS prices will be lower than of the Q2, as Asian merchant demand softens, partly due to increasing local production of slabs. However, the average Brazilian and the US prices are going to remain elevated.
Due to large volumes already exported from Brazil to the US in the first six month of the year, Commodity Inside expects that the 3.5 Mt/year quota will likely to be reached by October. Since then, prices are set to fall in the remainder of the year, as Brazilian origin slab would have exhausted its quota for the year and will be looking for potential buyers elsewhere.
This article is based on the 2018 edition of our recently publish report “A Five Year Strategic Outlook for the Global Merchant Slab Market”.
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