Tumbling Russian ruble challenges seaborne scrap and billet

Singapore — The severely weakened Russian ruble has aided a more competitive East Asian scrap and billet seaborne market, with contracts predominantly made in US dollars, sources said.

The ruble, crashing to a more than 4-year low, started falling off strongly since March 5, and was marked at Rb80/$1 Thursday, and posting a loss of 29% since the start of the year.

"The weaker Russian currency will make the predominantly traded US dollar contracts more attractive to Russian suppliers," a regional ferrous scrap trader told S&P Global Platts.

Recent scrap seaborne trades have started to see a strong emergence of Eastern Russian A3 material, of which a staggering 90,000 mt was sold to South Korea at $247/mt CFR Wednesday.

"With such competitive Russian scrap prices, the US West Coast suppliers might not be able to stomach and match this steep drop," a South Korean trader said.

Russian semi-finished steel billet too saw offers falling off to $405/mt CFR Manila this week, with the weakened ruble sandwiched by the more pressing lackluster demand amid the regional coronavirus lockdowns and restrictions.

Russian billet offers to the Philippines have slipped $15/mt since the weakening of the Ruble during the first week of March and a total decline of $45/mt, or 10%, since the start of 2020, Platts' data showed.

The weaker ruble has also affected trades from the western parts of Russia, which has already been partially attributed to weighing in on the falling Black Sea slab prices this week.

Additionally, major uncertainties in Europe have already led the Platts Turkish HMS I/II 80:20 index to shed 7.4% within a period of two days, or $19.50/mt, to $242.50/mt CFR Thursday.

"With the steep fall in the ruble, it would make it much more difficult for US [scrap] exporters to compete against the Russian suppliers for the Turkish market," a US-based scrap supplier said.

Potential support for PCI exports

The weakened ruble in theory should also provide additional incentive for Russian coal miners to increase coal exports, but they continue to face logistical challenges, blocking off chances for them to capitalize on a favorable ruble/dollar rate. Russian coal miners were heard to be increasingly looking to diversify coal of different grades, like anthracite and pulverized coal injection, via the country's eastern ports to potential buyers in East Asia, amid ailing European demand.

However, supply of Russian PCI in the spot market faces continued constraints by limited railing capacity towards the eastern ports. Railing capacity has largely been maximized, restraining the ability for miners to export additional coal within the near term even if prevailing winter conditions ease, sources said.

Additional to railing constraints, spot supply of Russian PCI continued to remain tight amid winter conditions in Russia that have negatively affected throughput volumes. Thus, even with the weakened ruble to support PCI export activities, volumes may not see any large increases due to limitations of supply and logical support.