Russian Ruble depreciated over 94% in a year’s time. Ruble depreciation may lead to greater export gains for Russia, compelling Chinese producers to further push down steel prices.
There is threat looming on global steel market as markets are anticipating that Russian currency Ruble may fall further owing to falling Oil prices. If Ruble falls back to 70 per USD, export realizations for Russian steelmakers will increase which may put pressure on global steel prices.
Global Oil Crisis
With the USA’s increase in domestic crude oil production over the last few years, there has been significant decline in its fuel demand. All the major oil exporting countries including Russia are suddenly competing for the Asian markets, which has forced the producers to drop oil prices. On the demand side, economy of European and developing countries’ are weakening and vehicles are becoming more energy efficient. Thus, demand for fuel is lagging a bit. Crude oil prices have fallen by 50% in last one year.
Impact of Oil Crisis on Russian Currency
Russia, world’s 5th largest crude steel producer, is suddenly facing acute currency crisis with no recovery in falling oil prices. The nation is now bracing itself for a recession. Russian ruble has depreciated by almost 94% in last one year. The same was traded at 35.75 RUB per USD in Jul’14, which is currently being traded at 57.69 RUB per USD.
Impact of Depreciating Currency on Steel Industry
Though, the depreciation in Ruble has pushed up the prices for millions of Russians, the country’s steelmakers are suddenly competing with world’s largest steel producers by exporting cheaper steel. Russia’s steel export has increased from 23.5 MnT in 2013 to 27.7 MnT in 2014. Steel prices have softened in the past year. Export prices of HRC from Russia have dropped more than 30% in last one year to USD 340/MT.
The depreciation in ruble would lead to increased export offers from Russia, which may further pressurize the Chinese exporters to push down their prices. Since Ukraine is in similar position as that of Russia, its currency has also weakened by 66% in one year. Both Russia and Ukraine together will lead to increased steel export this year (Russia and Ukraine combinely contributes to 16% of the global steel export).
With cheaper exports from Russia and China, the domestic players in Indian steel industry, who are already reeling under pressure, will in turn be badly affected; leading to further fall in their production, sales, and profit figures.
FOB Black Sea’s Billet and HRC Prices
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