WEAK DEMAND GROWTH UNDERMINES PRICE SENTIMENT IN EMERGING STEEL MARKETS

Brazilian domestic steel distributors have begun to press for additional price concessions from their local suppliers. The Instituto Aço Brasil (IABr) has reported that finished steel sales in the home market during April totalled 1.51 million tonnes – down 22.0 percent, compared with the previous month’s figure.

Difficult business conditions persist in the Russian Federation. Local trading houses plan to postpone purchases until the pricing scenario is more transparent. Domestic steelmakers have delayed releasing their preliminary June basis quotations for both flat and long finished steel products.

India’s Ministry of Steel has proposed imposing stricter quality controls for semi-finished and finished steel products imported into the country. If the new measures are formally approved, materials covered by the new codes would have to be certified by the Bureau of Indian Standards (BIS).

The market remains challenging in Ukraine. The May trading period was shortened by the close proximity of the Easter and national holidays.

Turkish steelmakers have had mixed success in their efforts to obtain higher transaction values to distributors. The strength of the US dollar against the local currency remains a problem.

Uncertainty continues to unsettle business confidence in the United Arab Emirates. Local distributors are forecasting no significant price recovery in either the flat or long products segments in the interim. The majority plan to purchase only on a requirement basis until the pricing scenario is more transparent.

South African service centres are growing more pessimistic about the prospects for domestic steel consumption in 2015. Deliveries to downstream industries continue to underperform.

Challenging business conditions persist in Mexico. Local steelmakers are expected to shadow the pricing strategies of their US counterparts next month.

Source: MEPS – Developing Markets Steel Review – May Edition

MEPS – GLOBAL STEEL PRICE RISES IN MAY FOR THE FIRST TIME IN TWELVE MONTHS

US strip mill product transaction prices have firmed, following recent price hike announcements by all the major producers. The mills appear to be quite disciplined about the implementation of the increase. Moreover, delivery lead times are slowly extending and the threat of trade cases against overseas suppliers has made buyers very cautious regarding booking foreign material. Distributors, who still have plentiful stocks, continue to reduce inventories.

Canadian mill activity is still poor, with short delivery lead times. However, import volumes are drying up as domestic prices become more competitive. Market participants believe that transaction values have now reached the bottom. Service centre sales are steady, but sluggish for the time of year. The high priced stocks that all distributors are carrying are weighing heavily on resale values.

Cheap iron ore continues to undermine market prices in China. Demand from the property market, auto, shipbuilding and appliances is weakening. The People’s Bank of China recently made its third interest rate cut in six months in order to support the economy. Major steelmaker, Baosteel, has left its official ex-works list prices, for the June delivery of most flat products, unchanged from the previous month. June is typically a slow season for the Chinese steel sector.

In Japan, inventories of flat rolled products are still in surplus. Several large steelmakers will cut output, in the April/June period, to try to rectify the situation. In March, shipments of carbon steel finished products were at their highest level for two years but the rise was purely due to better export volumes. Domestic deliveries actually fell. Although overseas business is brisk, export prices continue to tumble. Import volumes, in March, fell 33 percent to the lowest point since September 2013, partly due to the weak yen, but also because of less healthy levels of consumption.

South Korean steelmakers are concerned about the high volumes of low-cost Chinese material entering their home market, even though steel imports shrank by over 8 percent in April from a year earlier. The main reasons for the contraction were slumping demand and climbing inventories. The economic recovery remains lethargic. In addition, more recently, Russian offers to the Southeast Asian market have disrupted South Korean exports to that region.

Chung Hung Steel, one of Taiwan’s major flat product re-rollers, announced lower list prices for May contracts, compared to the figures published for April. The cuts were a similar magnitude to those previously announced by major integrated producer, CSC, for June. Marketplace transaction figures have mirrored the move. Sales remain weak amidst stiff competition from cheap imports.

In Poland, strip mill product prices are stable. Buyers do not believe that significant increases are possible in the present climate. Consumption is reasonable but imports continue to take up a large share of the market. Czech/Slovak transaction values have softened slightly, despite improvements in the economies of both countries. Market sentiment has certainly revived amongst many Czech manufacturing companies due to the weakness of the currency, cheap energy and recovering domestic demand. There is less competition from Ukrainian steel mills as their output has been curtailed by the political crisis in that country.

Flat product numbers are generally unchanged in Western Europe, although we can detect a little negative pressure in certain countries. Activity is picking up, albeit slowly, as the economic climate improves. Some steelmakers have decent order books. However, their raw material costs remain low, providing them with limited backing to lift selling prices. Many third country producers continue to reduce flat product price quotations. Buyers are beginning to show more interest, although, much of this material would be arriving in the holiday period.

Source: MEPS International Steel Review – May Issue

UK STEEL PRICE ROUNDUP FROM MEPS INTERNATIONAL LTD

UK commodity plate prices are still higher than those in most of mainland Europe, according to MEPS. This is attracting imports, aided by the strength of sterling. Resale values are still under pressure. The lack of investment in the oil industry means sales to that sector have plummeted. Construction demand has held up but selling figures have been damaged by the availability of cheap Chinese material.

Buyers report that Russian suppliers of cold rolled coil have reduced their offers. Domestic basis number have weakened slightly from the reduced level established in April. Customers consider the bottom has been reached for coated coil transaction values. There are fewer, cheap Chinese offers. The vehicle sector is healthy and distributors are busy with sales to the building industry.

Prices for structural sections have tumbled as order intake has slowed. The weak euro has given mainland European suppliers significant advantages. The environment for distributors is increasingly challenging as lower ex-mill values have led to stock losses. Even so, there appears to be no resolve on their part to push resale values up. The larger players are selling at particularly low numbers. April was quieter than expected but there should be plenty of activity in the future.

UK rebar prices for forward orders are at a similar level to last month. Despite healthy underlying demand, the domestic producer has little possibility of lifting values at the moment. There is severe import pressure, mainly from Chinese sources but also from mainland European suppliers taking advantage of the current exchange rate. There is plenty of material sitting at the docks and service centre stocks are considered to be a little on the high side.

Some price erosion was noted for merchant bar, during the latter part of April, but, since then, things have stabilised. Service centre stocks are reasonable. There are plenty of offers from mainland Europe due to the weak euro.

Source: MEPS – European Steel Review – May Issue

EU STEEL PRICES HOLD UP IN DIFFICULT MARKET CONDITIONS – MEPS INTERNATIONAL LTD

Flat product basis numbers are generally unchanged in western Europe, although MEPS can detect a little negative pressure in certain countries. Activity is picking up, albeit slowly, as the economic climate improves. Some steelmakers have decent order books. However, their raw material costs remain low, providing them with limited backing to lift selling prices. Many third country producers continue to reduce flat product prices. Buyers, in general, are beginning to show more interest, although, because of the long delivery lead times involved, much of this material would be arriving in the holiday period.

German buyers anticipate flat, or slightly lower, values in the third trimester. The direction will depend on demand, which, currently, is slightly better than in 2014. Service centres are busy supplying the booming auto industry and sales to construction are also satisfactory. However, distributors’ margins remain low because of overcapacity in that sector.

In France, market participants remain sceptical about reports of an economic recovery as they have seen no signs of it, so far. Activity in the steel market continues to be generally lacklustre, with some sectors, such as construction and energy, suffering more than others. For now, steelmakers are unable to raise prices. Third country import volumes have increased because the Chinese and Indian suppliers have aligned their prices to local values.

Italian flat product basis numbers are also below those reported last month, mainly due to import pressure. The number of Chinese offers, in particular, is growing. Industrial production activity in the first quarter 2015 was slow to start, although it accelerated a little in March. The only sector to record any real improvement was automotive. The recovery in carmaking is now the main driver of steel consumption in Italy. Ongoing attempts by steelmakers to lift prices should, at least, produce some stability.

UK service centres report that April business was still at a good level, although perhaps slightly down on March, in some instances. Resale margins are reasonable. Ex-mill basis values have stopped falling. Buyers feel that prices have now reached the bottom and, subject to exchange rate movements, will be similar in the third quarter. Traders are no longer pushing Chinese material, which is, currently, only slightly cheaper than European.

Belgian stockholders have plenty of material. There is a great deal of competition between them to gain orders. Consequently, their profit margins are thin. Market players expect the present situation to persist until September.

In Spain, steel buyers are waiting to see how the European mills will react to very attractively priced third country quotations. Decisions will have to be made quite soon if customers are to take advantage of these cheap offers. Already, some companies have booked overseas business as the price differential is quite large. However, domestic producers are reluctant to offer discounts as, at present, their order books are satisfactory because local consumption is improving and export sales are reasonably good. The situation is finely balanced.

Source: MEPS – European Steel Review – May Issue

SOUTH KOREA STEEL MARKET ROUNDUP FROM MEPS INTERNATIONAL LTD

Demand on South Korea’s hot rolled coil mills is subdued, amidst an inflow of low-priced imports from China and a slowing economic recovery. According to MEPS, during recent settlements, domestic steelmakers have agreed to further discounts.

Demand from shipyards is forecast to be generally flat, for the remainder of 2015. Sales to the construction sector are also poor and inventories at the distributors are excessive. There is severe internal competition for the little business available and attractively priced import offers are being made. We have noted a further downward price correction for commodity plate.

Poor domestic consumption, combined with strong rivalry from Chinese suppliers, has forced cold rolled coil producers to concede further discounts. The vehicle manufacturers are pushing for large price reductions as their sales are far from robust. Demand for cold rolled coil from other market sectors is also depressed.

Vehicle output fell again in March, year-on-year. Car exports suffered because of competition from Japanese manufacturers who had the advantage of a weaker yen. Building demand for coated material has also shown no substantial revival but forecasts, for later in the year, indicate better conditions. Steelmakers have been forced to offer a small incentive for the fourth month in a row.

Foreign suppliers are taking an increasing share of the H-beam market in South Korea. The country’s steelmakers are urging the government to initiate an anti-dumping investigation into imports from China. Poor sentiment in the building sector, together with high volumes of cheap overseas material, have led to another negative price movement.

Rebar selling figures have slipped, once again. The negative movement has been caused by poor demand from a depressed building sector and highly attractive offers from Chinese suppliers. Forecasters are still predicting improved sales in the coming months.

BRAZIL STEEL MARKET ROUNDUP FROM MEPS

Suppliers in Brazil have held hot rolled coil transaction numbers steady for April business, according to MEPS. However, local stockists are anxious that domestic suppliers will press for price increases in the next trading period.

Hot rolled plate traders plan to persevere with conservative procurement strategies, citing weak shipment volumes to pipe and tube fabricators. Meanwhile, cold rolled prices held relatively stable month-on-month in April.

Challenging business conditions persist in the Brazilian coated coil market. Local traders expressed concerns that their domestic suppliers will seek higher prices in May.

Structural section and merchant bar distributors contend that local products remain overpriced. They fear that foreign supply will intensify if the domestic/import price premium continues to widen.

Source: MEPS Developing Markets Steel Review – April Edition