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