Posted on 05 Mar 2019
NLMK stopped shipping Russian slab to its US subsidiaries in February, after securing supply from other countries that have received a US steel tariff exemption. So said the chair of NLMK’s strategy committee, Oleg Bagrin, during the steelmaker’s new 5-year strategy presentation in London on Monday.
The company is still pursuing the legal route to obtaining an exemption from US tariffs, and will return to the drawing board to tackle further strategy at the next AGM in April, said ceo Grigory Fedorishin.
With hot rolled band to slab spread in the US currently at $250-300/tonne, according to Bagrin, "…the premium not available anywhere else in the world, the duty in excess of $100/t is the price you pay for market access.” But despite still being profitable, the scenario is unsustainable, adds to volatility, and prevents planning ahead. One project – the heating furnace reconstruction at the Pensilvania works – is now on hold after 25% of capital expenditure has already been spent. This is part of $300-400 million of investments into NLMK’s US facilities that have been suspended.
This is "…unfortunate," Fedorishin tells Kallanish, as the company wants to continue to grow its US business. Price spread is expected to bounce back to more regular levels as more companies gain access to the US market by receiving duty exemptions, and US domestic output grows. NLMK may consider a partial exit, but it therefore "…does not make sense to exit the US market completely."
NLMK Pensilvania switching to non-captive slab will not add merchant monthly availability from NLMK, however, Fedorishin says. Slab output is already down due to the start of major upgrades to the blast and basic oxygen furnaces at the flagship Lipetsk mill as the company embarks on a second major five-year development plan, Strategy 2022.
"We will now have 1 million-1.5 million tonnes/year of merchant slab, which we can redirect," Fedorishin tells Kallanish.
