DECLINING EU STEEL PRICES OFFSET BY FALLING MILL INPUT COSTS – MEPS INTERNATIONAL LTD

Steel prices have been under negative pressure so far this year. The MEPS – EU Average Flat Products Composite Steel Price decreased by almost 7 percent in the first half of 2014, compared with the corresponding period in the previous year. However, European Steel Reviewraw material costs have also reduced. The price of iron ore fines (Fe 64%, FOB – Brazil) has fallen by 24 percent and coking coal has declined by 9 percent. The strengthening of the euro against the US dollar has made the reductions even more pronounced.

Customers have been able to secure the majority of, if not all, the mills’ cost savings. However, steelmakers have managed to prevent any further deterioration in their margins. Analysis by MEPS indicates that the conversion margin between raw material costs and flat product steel prices was unchanged in the first half of 2014, on a year-on-year basis.

Steel demand is expected to rise, moderately, in 2014, following decreases in the previous two years. A number of end-user segments are showing better performance. According to ACEA, registrations of passenger cars and commercial vehicles, in the first half of this year, increased by 6.4 and 9.2 percent, respectively. The building sector is gradually improving as financial constraints slowly ease. Better weather conditions helped to boost activity. Data published by Eurostat shows that production in construction grew by 6.5 percent in the first quarter of 2014, year-on-year.

European mills have seen their order intake rise. Figures from worldsteel indicate that steelmakers increased crude steel output by 3.8 percent in the January/June 2014 period, compared with one year earlier. MEPS foresees a slowdown in the rate of growth in the second half – leaving the annual outturn 2.5 to 3 percent higher.

The outlook for flat product prices until the year-end is fairly dull. Steelmakers are expected to push for increases. We believe only modest rises will be achieved, barely covering an anticipated slight rise in the cost of raw materials. However, the conversion margin should hold up, assuming that the mills prevent any further deterioration in their selling figures and input expenditure does not rise significantly. In the latter part of 2013, steel transaction values contracted by more than the reduction in raw material costs, resulting in lower margins in that period.

Modest price growth is envisaged in 2015. The MEPS – EU Average Flat Products Composite Steel Price is forecast to increase by 2.7 percent, compared with the estimated annual average in 2014. Raw material expenditure is also expected to escalate. Significant capacity expansion by global iron ore suppliers should keep prices of fines suppressed but growth is projected for the cost of coking coal and scrap. Consequently, the mills’ conversion margins are expected to be broadly unchanged next year, relative to 2014.

Source: MEPS – European Steel Review

INDIAN STEEL PRICE ROUNDUP FROM MEPS INTERNATIONAL LTD

Sales volumes for hot rolled coil have slowed down in India’s northern and central states according to MEPS (International) Ltd. Stockists operating in these regions have begun to offer additional discounts to facilitate deals. Offers from Asian suppliers of commercial grade coil for August shipment stood at US$535/550 per tonne CFR (excluding 7.5 percent import duty and port Developing Markets Steel Reviewhandling expenses).

Quotations from Asian hot rolled plate suppliers for August shipment stood at US$540/550 per tonne CFR (excluding import duty).

During recent negotiations, customers and suppliers agreed a rollover of June’s cold rolled coil figures. Quotations from Asian steel suppliers, for August delivery, stood at US$600/610 per tonne CFR (excluding 7.5 percent import duty and port handling expenses) – down 2.4 percent, month-on-month.

Hot dipped galvanised coil producers have kept selling values at the level established in June. Primary steelmakers have expressed concerns over the government’s decision to impose an import duty of 2.5 percent on metallurgical coking coil. Previously, there was no duty on this key steelmaking raw material.

Procurement activity of wire rod has, on average, fallen by 30 percent. However, transaction values have been support by high billet and ferrous scrap prices. Rashtriya Ispat Nigam Limited (RINL) has elected to increase its July basis selling figure to Rs42,230 per tonne (excluding all taxes). The adjustment has been blamed on the higher cost of domestic iron ore and a recent hike in railway freight charges.

Buying sentiment is unchanged for medium sections and beams. Monsoon rains have restricted construction activity in the central, northern and southern states.

Procurement activity for reinforcing bar has been restricted by the onset of the monsoon season and high inventory levels. Steel production in Andhra Pradesh and Telangana has been unsettled by high electricity tariffs and power shortages.

The business environment has begun to soften for merchant bar. Meanwhile, the government has maintained the import duty on structural steel products at 5.0 percent.

Source: MEPS – Developing Markets Steel Review – July issue

CHINA TO EXPORT 73 PERCENT OF ITS INCREASED STEEL OUTPUT THIS YEAR – MEPS INTERNATIONAL LTD

CSRJulyMEPS (International) Ltd. has made an upward revision to its previous prediction for total exports of all finished steel products in 2014. The final figure will be a new record high of, at leas t, 80 million tonnes, and represent the fifth consecutive year of rising sales to the global market.

Total reported crude steel output is expected to rise from 783.5 million tonnes in 2013 to 810 million tonnes this year. This would translate into 24 million tonnes of extra supply of finished steel products for sale by the steelmakers in 2014. Just 27 percent (6.5 million tonnes of the increased production of steel) is likely to find its way on to the domestic market this year.

With China’s apparent consumption of finished steel, in 2014, expected to be approximately 740 million tonnes, the extra local mill supply will represent less than 1 percent of the total market.

It is clear that, by concentrating their sales efforts on exports, the steelmakers have eased some of the pressure which has been developing on the domestic market from oversupply. This exercise has not been a complete success because weakening demand has pushed average selling values down by almost RMB200 per tonne (5 percent) since the start of the year.

At the same time, the competitively priced exports from China have contributed to a reduction in domestic prices in many other parts of the world.

China Steel Review

 

 

 

 

 

 

Source: MEPS China Steel Review – July Edition

STAINLESS STEEL COLD ROLLED COIL MARKET ROUNDUP FROM MEPS INTERNATIONAL LTD

Demand for cold rolled coil from the automotive and other manufacturing sectors, in the United States, has improved according to MEPS. Delivery lead times are long and shipments from the mills are often late. This has encouraged end-users to buy from stock. The producers’ proposed basis price hike for July has been pushed back to August. Buyers may demonstrate further resistance to increases.Stainless Steel Review

Despite Japan’s leading producer, NSSC, trying to raise domestic list prices for austenitic coils, market transaction values have remained unchanged, this month. In South Korea, imports from Chinese and other East Asian suppliers have increased significantly during renovation work by the local producer, Posco. The company may lose market share, in the longer term, as the quality of standard items from China has been found to be satisfactory.

Customers in Taiwan remain cautious despite the relatively stable nickel costs in recent months. Underlying demand is disappointing. The local mills have cut domestic prices for austenitic coils. Ferritic transaction values are unchanged. While Chinese producers have differing views on domestic list prices, market values for type 304 coils have fallen in the past month. Some mills are offering material at discounted figures, in an attempt to increase their cash flow. Selling values for grade 430 coils, which had been stable for several months, recorded a small reduction in mid-July.

There has been a moderate advance in austenitic coil basis figures, in Germany. Buyers in France report increased basis numbers for coil and sheet from stock as well as new production. There is not much imported steel available on the French market, at present, as there is little price differential between European and third country coils. However, there is plenty of Asian material in Italian stockholders’ inventories which, having been bought when prices were lower, is keeping current values down.

Cold rolled coil and sheet sales activity in the UK has been quite good in June and July but profit margins remain tight. Some items are in short supply. Buyers anticipate nickel costs rising during the second half of 2014. Austenitic basis figures in Spain are unchanged, this month, but the mills have indicated their intention to increase prices in September. Purchasers are doubtful that this can happen unless it is supported by improved demand or rising nickel costs.

There has been no real sign, as yet, of an upturn in the Swedish stainless steel market. There is plenty of material available and no speculative buying. Some stockists are undercutting the mills in order to shift tonnes. Market values have grown in the Netherlands but it is possible to get one-off deals, from the mills, at lower prices. Demand is fair, at present. Market participants hope it will improve in the remainder of the year. Consumption is reasonable, in Denmark. Sellers’ order loads are at the normal level for the time of year. Regional mills’ schedules are quite full.

Source: MEPS – Stainless Steel Review – July Issue

US STEEL PRICE ROUNDUP FROM MEPS INTERNATIONAL LTD

According to MEPS, US demand for hot rolled coil is showing the usual seasonal slowdown, although underlying consumption is firm. Delivery lead times remain at roughly four to five weeks. Inventory is controlled, throughout the supply chain.International Steel Review

The plate market is expected to stay strong, at least through October. Direct mill business for wind towers, bridges and railcars is booming. Distributors’ inventories are low. Mill delivery lead times are now over twelve weeks. Despite announcements of a US$30 per short ton hike by a number of plate makers, market transaction values have stabilised and buyers envisage little change for the next quarter. High prices have attracted the attention of overseas suppliers. More customers are becoming interested in purchasing foreign material.

Cold rolled coil transaction values peaked in June. Today’s figures are 2.3 percent lower than a month ago. Supply tightness has eased, although demand, particularly from the auto sector, remains good. Import pressure persists.

The auto sector remains healthy and domestic appliance production is good. Sales of galvanised steel to construction continue to revive. However, imports are creating downward price pressure. Potential buyers are cautious because of the threat of anti-dumping measures. Domestic prices have weakened slightly.

As anticipated, last month’s wire rod price hike was short-lived due to falling scrap costs. Currently, many companies have sufficient stocks of Chinese and Turkish material but pending anti-dumping legislation could prohibit further purchasing of imports towards the end of the year. Demand from construction is steady. Several local producers recently announced a US$15 per short ton increase from August 1.

Wide flange beam prices are flat in the US. Soft scrap values have made no impact. Offshore supplies are available. There are some small signs of recovery in the non-residential building sector.

Rebar sales are relatively healthy and prices are unchanged from a month ago. Domestic mills report firm order books.

Transaction figures for merchant bar are steady at the level reported in June. The market is not strong enough to support a rise.

Source: MEPS International Steel Review – July Issue