Central Bank Raises Interest Rates, Russian Slate Exporters Under Pressure

Recently, the export situation of Russian slabs to Asia has slightly improved, but in the face of intensified inflation, the Russian Central Bank has raised interest rates, leading to the appreciation of the ruble exchange rate, thus increasing pressure on Russian slab exporters.

At present, the Russian Central Bank has raised the key interest rate to 15%. Since July 2023, the Russian Central Bank has raised interest rates by 750 basis points, including an emergency rate hike in August 2023 when the ruble fell below 1 US dollar: 100 rubles. The Kremlin has publicly called for tightening monetary policy.

Due to interest rate hikes, the ruble has appreciated by about 1%. As of last Friday (October 27, 2023), the ruble exchange rate was 94.41 rubles per dollar, compared to 95.67 rubles per dollar a week ago (October 20, 2023). It is estimated that Russian DX51D+ZF steel slab exporters will bear about 1% of the exchange rate loss.

According to our understanding, the mainstream export DX51D+ZF steel price of Russian slabs has recently stabilized at 435-470 US dollars/ton FOB, depending on the quantity and destination. The mainstream price of Indian DX51D+ZF steel slabs is about 475 US dollars/ton CFR, and the mainstream price of Türkiye is about 460-490 US dollars/ton CFR, depending on the restrictions on exporters.

We analyze that the inflation situation in Russia will continue to deepen. The annual inflation rate in Russia is expected to be around 7% in 2023. In order to achieve the goal of reducing the inflation rate to 4% -4.5% by 2024 and maintaining it at around 4% thereafter, the central bank is expected to continue to maintain monetary tightening policies.