Large volumes of imports, together with collapsing oil prices, have led to cuts in domestic steel production in the US. However, these have not been sufficient to stem the continual, month-on-month, decline in flat product transaction values. Buyers are reluctant to make large purchases as figures trend downwards. Moreover, the volumes of unsold foreign material at the docks are climbing. Some of this steel is now priced above current domestic levels as local steelmakers have responded to the import threat. Activity at the local steel plants in Canada is also slow due to high volumes of imported flat products. This, together with a dropping outlay on raw materials, has forced producers to make further substantial transaction price cuts.
Overcapacity problems, dramatically declining iron ore prices and disappointing economic indicators have driven steel selling values to record lows in China. Negative sentiment is growing. Recently, the Central Bank cut the bank reserve ratio in an effort to shore up flagging economic growth. Market players are waiting to see the impact on the steel sector. The Lunar New Year Festival (February 19-24) was later than it has been in the last few years. This led to buyers postponing steel order placement for a longer pre-holiday period than usual. Dealers were under pressure to sell ahead of the vacation. In overseas markets, export volumes reached a new high in January.
Japanese sources expect annual consumption in that country, in fiscal 2015, to be at a similar level to that recorded in the previous year. Competition from overseas continues to pose problems but the depreciation of the yen against the US dollar is acting as a slight deterrent. Nevertheless, recent figures show that annual imports, in 2014, increased for the first time in three years.
Concern amongst local South Korean steelmakers is growing as low-priced Chinese products continue to flood the market. There is also internal oversupply due to the number of new production facilities that have been brought on stream in recent years. All this material continues to weigh heavily on selling values, which have undergone further negative developments this month.
In Taiwan, flat product transaction values have continued to fall. Integrated producer, CSC, had anticipated further declines when it cut official domestic list prices for March by an average of 2.3 percent, compared with the figures published for the January/February period. Global markets are very competitive at present and both the steelmakers and manufacturers of finished goods have concerns about their ability to sell overseas.
Steel consumption in Poland during 2014 returned to pre-crisis levels. However, imports continue to gain market share. This month, domestic transaction values for flat products are unchanged in euros but have slipped a little when measured in zloty terms due to the weakening currency. Buyers say that these figures are valid until the end of March, although they admit that suppliers are talking of increases.
Czech/Slovak transaction numbers have not recovered since the Christmas holidays. Although the economy is improving there are no positive signals to support an immediate rise. However, since the political problems began in Ukraine there has been less pressure from the suppliers in that country, which used to be the main import influence on the Czech steel market.
Western European flat product makers claim that they have good order books, as the devalued euro gives them an advantage when selling in US dollar denominated export markets. Nevertheless, buyers have remarked that for first quarter business, which is now virtually closed, steelmakers did not push very hard to implement their proposed €30-40 per tonne advance. It is believed that the mills will try to enforce the hike when second trimester orders are discussed.
Source: MEPS International Steel Review – February Issue