The prevailing sentiment throughout the stainless steel supply chain is one of “cautious optimism” that 2014 will be a little better than 2013, in terms of both business volumes and profitability.
Market participants have been, for some time, expressing the view that activity and prices have been bumping along a prolonged bottom in the business cycle and that that situation is close to its end.
A number of major western industrial nations have begun to record encouraging economic indicators, such as positive GDP growth, increasing manufacturing output and falling unemployment. The Japanese government’s economic stimulus measures, or “Abenomics”, have, at least in the short term, boosted industrial activity in a market that has been in the doldrums for two decades.
MEPS forecast for crude stainless steel production anticipates growing output in all the traditional stainless steelmaking countries and regions – the EU, the United States, Japan, South Korea and Taiwan. This would be the first time this has happened since 2010. Furthermore, stainless steelmaking capacity continues to grow in the developing markets, despite existing oversupply. We, therefore, predict output in China and other emerging countries to continue to increase slightly faster than in the West.
Nickel values are expected to rise in the early part of this year, despite the enduring global surplus. The medium-term effects of Indonesia’s imminent ban on mineral ore exports remain uncertain. Meanwhile, further hikes in ferrochrome prices are foreseen during the first half of 2014. Although stainless steel suppliers have, so far, reported no sign of a significant upturn in order tonnages, the belief persists that there will be a moderate increase in activity in the coming months and that 2014 could be the industry’s best year for some time.
Source: MEPS –Stainless Steel Review
An upturn in steel prices in North America and the European Union at the end of the year, pushed the MEPS world composite benchmark steel price to its highest level since March.
US demand for flat products is stable but expected to show some signs of growth shortly. Inventories throughout the supply chain are tightly controlled at a low level. Ex-mill transaction values have continued to escalate over the last month. Producers’ scrap costs are also rising. With good order books for the first quarter 2014 and extending delivery lead times, the steelmakers may well endeavour to hike prices further in the coming weeks.
In Canada, mill rolling schedules are reasonably full with order placement now well into February. Transaction figures are firm and, in some cases, above those of the previous month. However, at the service centres, demand is still inconsistent. It is a struggle for them to pass on all the mill increases to resale customers, who are only purchasing what they currently need, rather than rebuilding stocks. Nevertheless, buyers believe there is still room for further price improvements.
The recovery in the Japanese economy continues, leading to healthy and growing steel consumption. Producers are slowly, but surely, securing their proposed price rises. Inventories held by dealers are now well controlled. Export figures are also moving up, helped by the weak yen, although volumes have fallen as demand in key Asian markets is dull. The depreciated currency is also discouraging cheap imports.
The basis increase scheduled by the West European flat products producers for the first quarter 2014 has not been secured for January production. Demand remains slow across the region. Negotiations for the remainder of period one are ongoing. Long product prices have advanced slightly as the mills take advantage of upward scrap movements.
Source: MEPS International Steel Review
2013 is expected to be the low point in the latest steel price cycle. A steady economic recovery is anticipated over the next five years. Steel demand growth is predicted as economic activity expands.
Investment in new steelmaking capacity is expected to be restricted over the next five years – resulting in a lift of plant utilisation rates.
The cost of iron ore is forecast to reduce as a result of over-investment in mine capacity in Australia and Brazil.
Coking coal costs are expected to increase steadily in the period to 2017.
Significant growth in the cost of scrap is predicted in all the major regions over the next five years.
With increased demand for steel and higher costs of input material for the steelmakers, average steel prices should expand in the years to 2016.
The current oversupply situation in steel manufacturing is likely to reduce in the coming years – providing opportunities for the mills to lift their selling prices – despite the likelihood of declining iron ore costs for the mills.
Source: NEW – MEPS – Steel Price Forecasts to 2017