Russia’s largest steelmaker, Novolipetsk Steel (NLMK), has switched completely to using merchant steel slab supplies at its assets in the United States rather than continue to import its own slab, citing volatility in the market, a company executive said.
“The dynamics of the recent month show a sharp rise in the price of hot-rolled coil in the US,” Grigory Fedorishin, the company’s president and chairman of the management board, said during a conference call on Wednesday July 31.
“There have been three rounds of increases since the market hit bottom in June, which in total have pushed up offer prices by $70 per tonne. It is not clear whether the most recent rise will be accepted, though, because the market is unpredictable,” he added.
Fastmarkets' daily steel HRC index, fob mill US, was calculated at $29.85 per hundredweight ($597 per short ton) on July 31. This was up from $25.54 per cwt on June 21, when the market touched a more than two-and-a-half-year low.
Before the rapid rebound in late June, the index had been falling since March due to low local demand. On February 28, the index was calculated at $35.14 per cwt.
Another reason to stop bringing slab supplies to the US from Russia was the effect of the Section 232 tariff. Russia-origin slab is subject to a 25% import duty in the US.
“We stopped supplying slab from Russia to the US at the beginning of the second quarter [of 2019],” Fedorishin said.
For the first six months of 2019, the producer sent a total of 518,000 tonnes of slab to its re-rolling facilities in the US (NLMK USA) and Denmark (NLMK Dansteel), down from 1.11 million tonnes in the same period last year, the company said in its half-year operational report.
At the same time, flat steel product sales by NLMK’s US assets were largely unchanged year on year at 1.19 million tonnes in January-June 2019.
“Now we use the benefits of being a re-roller,” Fedorishin said. “We can increase or decrease our capacity utilization rate. We can buy slab or refrain from bookings.”
The producer has been buying slab for its US assets from Brazil and Canada recently but plans to procure material in the US when it is available and affordable.
Fastmarkets’ weekly price assessment for steel slab, export, fob main port Brazil, was $420-430 per tonne on July 26, unchanged from the previous week.
“Local mills are ramping up slab production, which will have a significant effect on prices,” Fedorishin said. “Moreover, Section 232 restrictions are no longer effective for Mexico and Canada. This will change the balance of imports in the US.”
The US removed its Section 232 tariffs against material from Canada and Mexico in May, which was expected to put downward pressure on domestic US prices.
Not the time to choose strategy
Earlier in March, NLMK USA chief executive officer Robert Miller said that the US did not produce enough steel slab for his company to be able to source such material domestically.
“Without an exclusion [from the Section 232 tariffs] for semi-finished steel slabs, the tariff will have the perverse effect of killing US steelmaking jobs and potentially putting our company out of business,” Miller was quoted as saying by news agency Reuters.
In early July, Miller blamed the Section 232 tariffs for the layoff at least 80 employees at NLMK USA’s Pennsylvania plant.
“We have no choice but to start laying off employees because we are not working as much as we were before,” he said. “And I believe that’s a direct result of the [Section 232] tariff.”
NLMK remains very interested in the US market and has ideas for investment projects, Fedorishin said on July 31.
“But we temporarily took a break because the market is too volatile at the moment,” he said. “If you look at prices, their movement is just unpredictable. It is not the right time to choose a strategy now because we do not understand how things will look like in the mid-term.”
Marina Shulga in Dnepr, Ukraine, contributed to this report.