Novolipetsk Steel is set to increase its crude steel output to 17.4m tonnes in 2012 by adding new steel

Global apparent consumption is forecast to grow by 5.3% in 2011, from 1.27bn tonnes this year to 1.34bn

t, according to the latest forecast from the World Steel Association. This year, the annual increase will be

Russia’s Novolipetsk Steel (NLMK) has commissioned a new 60,000 tonnes/year insulation coating line for

company has invested 1.5bn roubles ($50m) in the project.

The capacity of the new line exceeds the capacity of NLMK’s existing electric insulation coating lines by

30%. It also brings the company closer to its goal of launching production of nanostructured highpermeability

transformer steel (HPTS) in 2011, as the line allows for the metal heating and cooling rates

required for HPTS production, the company says.

Currently, the installation of the new reversing mill and the refurbishment of the normalisation line for hot

rolled sheet at Lipetsk are nearing completion. Their commissioning, scheduled for the end of this year, will

make it possible for NLMK to produce a planned 60,000 tonnes/year of HPTS at the site.

HPTS, with its especially low rate of magnetic loss, complies with the best available technologies (BAT)

standards. Used in power transformers, it reduces specific losses of electric energy by 10-15%, and is in

high demand globally, NLMK says. It plans to strengthen its position in the global transformer steel market

with sales of HPTS.

The NLMK Group has the capacity to produce over 340,000 t/y of transformer steel at Lipetsk and VIZ-Stal

in Yekaterinburg.

© Steel Business Briefing 2010

FOB $/t 550 - 570 550 - 580 550 - 570 540 - 550 530 - 540

The offer prices of billet for export from the CIS have gone down by $15/tonne from last week's levels of

$550/t FOB Black Sea to $535-540/t this week. Despite this, there is still little to no buying, market sources

As the end of the month is fast approaching, market players are not expecting any significant changes in

the market until October, when it will be more apparent what exactly, in terms of tonnages, producers have

to offer. "If producers really have as little billet as they say, then the market is likely to rebound on the back

of renewed buying activity," sources say.

Indeed, the stocks are perceived as minimal, and in some cases non-existent. A massive surge in buying is

highly unlikely, but the beginning of even moderate restocking will put stop to the current correction and

kick-start the market, they add.

"The question is, how will producers react to the renewed buying activity: will they just sell what they have

stocked and wait for the next month to return – or perhaps offer November and December casting –

remains to be seen and will determine to large extent how this market will complete the year," a major

producer says.

Despite the seemingly depressed sentiment, the majority of market sources remain modestly optimistic.

"We have seen this before – the stand-offs tend to finish eventually. The major concern is how to not to

oversupply the market after such a quiet period – we hope producers are aware of it," a major trader

concludes.

Following Baosteel, Wuhan Iron & Steel and Anshan Iron & Steel’s lead, northern China’s Shougang and

eastern China’s Ningbo Iron & Steel (Ninggang) have also increased their October ex-works prices.

Shougang has raised its October prices of hot rolled, cold rolled and hot-dip galvanized coil by RMB

200/tonne ($30/t), taking its Q235 5.5 HRC price to RMB 3,900/t ($582/t) and SPCC 1.0mm CRC to RMB

4,650/t. Both prices exclude 17% VAT.

Ninggang has decided to increase its October HRC prices by RMB 70/t, taking its Q235 5.5mm HRC price to

RMB 3,889/t non-VAT.

FOB $/t 540 - 560 550 - 570 550 - 580 550 - 570 550 - 560

Export offer prices of billet from some producers in Russia and Ukraine have gone down to $550/tonne FOB

Black Sea, in an obvious bid to match buyers' price expectations. "The correction is needed to get the

With demand still described as dormant, these new levels continue to look too high for the buyers however,

as there have been no reports of any deals at these levels. There is a modest optimism, however, that

buying should commence soon – "it will take one major market to start buying to kick-start this market

again," several sources say.

Indeed, with stocks understood to be minimal in all the traditional CIS billet markets, some re-stocking will

have to take place soon, market sources add. Whilst most do note that buyers are likely to continue to be

cautious and avoid over-stocking at all costs, "they cannot go on without some replenishment," they

admit.

Scrap import prices in Turkey – the usual barometer of the Black Sea billet trade – are seen as stable

rather than weakening, at $380-395/t cfr Turkey for HMS 1&2 80/20. Iranian appetite for billet is somewhat

weaker, however, with $600-620/t cfr Anzali as the current "working price level".

The sentiment is of continuous expectation of buying, but traders warn that producers should engage in

selling. "Should they wait for too long for buyers to accept, they might crash the market by attempting to

eventually off-load unsold volumes all at the same time, something which proved to be disastrous in the

Russian steelmakers Novolipetsk Steel (NLMK), Magnitogorsk Iron & Steel Works (MMK) and Severstal are

combining efforts to prompt the Russian industry and trade ministry to investigate imports of pre-painted

The mills are said to be concerned by a steep increase in imports of Chinese material into Russia, and

believe it is being preferred to domestic material because it is being sold cheaply.

“Russian producers can cover 90% of the national pre-painted coil market, but have to underutilise their

capacities instead. One of our two colour coating lines is hardly operating at the moment and our prepainted

coil sales have been hovering at the same level for four months,” a source at MMK says.

“Meanwhile, our Chinese competitors have captured a 50% share of the Russian market. Their sales

volumes soared from 3,000 tonnes in January to 94,000t in June,” he claims.

Due to its proximity to Asia, MMK is said to be affected more than Severstal and NLMK, as it has to

compete in regional markets directly exposed to imports from China.

“To make substrate and coat it, we use Italian equipment and BASF-made paint, in other words, comply

with top standards. If Chinese producers use lesser materials, we cannot beat them on price,” the MMK

source adds.

The border price for pre-painted coil from China is $1,600/t including VAT and hardly differs from Severstal’s

prices, one trader in Russia’s far east tells SBB.

Chinese domestic prices of hot dipped galvanized coil have been pushed up in tandem with the rising hot

rolled and cold rolled markets in China earlier this month. While market speculation on production cuts

resulting from a nationwide energy campaign has driven prices upwards since early September, there are

little signs of a pick-up in end-user demand for flat steel products.

At the same time, cuts in flat steel production have so far been very limited and this has resulted in a

weakening in market sentiment and traders’ initial bullish speculation has started softening.

In Shanghai, the prices of 1.0mm thick HDG are currently offered at RMB 5,250-5,300/tonne ($784-791/t)

with 17% VAT, while in Guangzhou’s Lecong market, similar products are offered at around RMB 5,450/t

($813/t) with VAT, up RMB 100/t ($15/t) and RMB 200/t ($30/t) respectively from early September.

Although HDG prices are still on a rise, transactions in the market have already shrunk significantly as

traders have slowed down their speculation buying after realising that the energy saving campaign may

Currently, the HRC and CRC prices have already turned downwards due to lack of buying from downstream

users. Some market watchers tell SBB that a downward price correction is also inevitable for HDG because

buying activity has become sluggish.

Monday, 20 Sep 10 © Steel Business Briefing 2010 21/21