Summarization and outlook of key market developments - CIS Countries

Russian and Ukrainian Market

Scrap

This week Russian and Ukrainian exporters of ferrous scrap have witnessed a decline in business activity in their key sales market. Having left the market for New Year holidays, most of them failed to catch the best moment to sign deals with Turkish buyers. While Russian and Ukrainian exporters, like most their European counterparts, were out of the market for holidays believing that the market will be calm during this period, US exporters successfully implemented a substantial lift ($40/t up) in quotations in Turkey and started 2011 with new prices. Most of Russian exporters are ready to reduce their prices. For example, while last week some suppliers from Rostov-on-Don, who returned to the market earlier than others, managed to sign a number of contracts at $515/t C&F ($484/t FOB excluding freight rate of about $31/t), now deals are made mostly at $500-505/t C&F ($470-475/t FOB). However, even in view of reductions, the current offers are still $30/t above the level of late December and completely cover the scrap collectors’ expenses. In turn, Ukrainian scrap has been changing hands at $500/t C&F at most. After selling most of January offering back in late
December at $450-460/t C&F ($420-430/t FOB), only a number of companies managed to hit the $480/t C&F level ($450/t FOB) by the end of the year. Currently, they have focused on fulfilling the contracts they signed. Nevertheless, the scrap collectors remain optimistic and expect to approach the $500/t C&F ($470/t FOB) mark by the end of January.


Pig Iron

Export prices for February production of pig iron from the CIS are growing. This rise has been caused by increased quotations of finished products and scrap. However, some suppliers keep holding their material off after holidays, waiting for scrap offers to go higher thus prompting a lift in prices for pig iron. Russian material is offered to Europe at $535-545/t FOB ports of Black and Baltic Sea now, $50-65/t up from late December. This level has not yet been supported with deals though, with maximum transaction prices being $530/t FOB for bookings to Central Europe. A small batch of Ukrainian pig iron has been purchased at $520/t FOB ports of Azov Sea ($40-50/t up). However, the estimated price for Ukrainian material is currently $530-535/t FOB ports of the Black Sea. Maximum quotations of January production of pig iron from Russia to Far East have been at $500/t FOB. In mid-January, traders are reportedly ready to supply the material at $535/t FOB. As of now, the suppliers have got no feedback from consumers on that point. However, producers will likely lift prices for their material ($30-35/t up) on growing cost of its substitutes and other raw materials in the Middle East, Metal Expert estimates. However this level will be rather artificially
inflated amid optimistic sentiments and transaction prices will likely approach it by late January only. CIS producers will cite growing production costs of pig iron as another reason for this. For example, the cost of raw materials used by Russian steelmakers in pig iron production will add $55-65/t, reaching $360-500/t in February, in view of rising prices for coal, coke and iron ore as well as due to increasing delivery expenses.