Russian Imports Are Now Eroding the Price of US Hot-Rolled Coil

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Coiled steel for import

Severstal and Novolipetsk Steel are paying wages and other costs, including transportation, in devalued rubles while earning dollars or euros for exported steel. That’s allowing them to undercut rivals like ArcelorMittal, the world’s largest steelmaker, while maintaining profitability.

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“This is fantastic time for the Russian steel industry,” Kirill Chuyko, head of equity research as BCS Financial Group told Bloomberg News. “Most of the companies are enjoying the best profitability since the 2007 and 2008 pre-crisis commodity boom due to the ruble’s decline.”

Even before the ruble’s 47% decline last year, the industry was in good health. Output in 2014 reached the highest since the global financial crisis as demand at home was high and started to recover in European export markets. Russia’s steelmakers have invested billions in upgrading Soviet-era mills, and the nation produces more than any other country in Europe, one of its main export markets.

Now, the ruble’s slide has cut costs for Russian mills by almost half in dollar terms. Making hot rolled coil, a benchmark product, now costs $244 to $250 a metric ton in Russia compared with $405 per ton in Brazil and $434 per ton in China, according to CRU Group, an industry consultant.

The 3-month price of the US HRC futures contract experienced the biggest price decline of the day, dropping 1.0% to close at $510.00 per short ton on Tuesday, March 3. The US HRC futures contract spot price fell to a 30-day low at $500.00 per short ton after shifting 0.6%.

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Chinese steel prices were flat for the day. The price of iron ore 58% fines from India hit a high price of CNY 450.00 ($71.90) and a low price of CNY 445.00 ($71.10) per dry metric ton. Chinese HRC held its value yesterday at CNY 2,530 ($403.11) per metric ton. For the fifth consecutive day, the price of Chinese coking coal held flat at CNY 1,080 ($172.57) per metric ton.

Also on the LME, the steel billet cash price saw little change in its price yesterday at $305.00 per metric ton. On the LME, the 3-month price of steel billet held steady around $305.00 per metric ton.

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