Flat product transaction prices in the United States have plummeted to lows not seen since the last recession in 2009. Global oversupply is leading to strong import competition, heightened by the strength of the US dollar. Although foreign supplies have declined from their recent highs, they remain well above historical levels. Buyers are purchasing cautiously because they expect the negative price trend to continue. There is no urgency to build stocks since domestic mill delivery lead times are short and the availability of third country material at the ports is plentiful. Service centre inventories are on the high side, as a result of slow sales to end-users, who are keeping their stocks as low as possible.
After stabilising in September, Canadian flat product values have started to slip. The economy is weak and steel market conditions soft, especially in the energy and mining sectors. Service centres comment that their business is patchy. They have too much stock, leading to lower resale prices as they try to offload tonnage. Comparatively inexpensive imports continue to arrive unabated. During negotiations with local customers, domestic steelmakers are reluctant to compete with these cheap offers. However, producers continue to sell in the US, aided by the weak Canadian dollar.
Chinese participants have now returned to the market, following the October national holiday, only to see steel prices continue on their negative path. The main issue is one of oversupply, as growth in the economy slows. Local steel demand appears to be peaking. We have yet to see any significant production cuts, despite many steelmakers operating at a loss. Producers are increasingly focussing on overseas sales. Export volumes are likely to remain high until anti-dumping duties start to bite.
Japanese consumption continues to decline and imports of cheap steel pose a major problem for domestic steelmakers. However, market participants report that sales activity has begun to improve a little. Exports are faring better, on a weaker yen. Following recent large cuts, Tokyo Steel has announced that it will keep official list prices unchanged for November contracts because selling values are hitting the bottom and shipments are reviving. In the marketplace, we have noted small decreases for a number of products.
South Korean demand remains lacklustre, particularly from the construction industry. Total steel production was down more than 3 percent in the first nine months of 2015, compared with the same period a year earlier. However, the surge in imports has slowed. Volumes from overseas sources were down in September by around 10 percent, year-on-year. Chinese material accounted for over 60 percent of the total.
Neither sales nor prices are showing much sign of improvement in the Taiwanese market. There were expectations amongst buyers that major integrated steelmaker, CSC, would axe December prices. Instead, the company has decided to leave them flat compared with August. Flat product re-roller, Chung Hung, left domestic list figures, for October, unchanged and cut export quotations by around US$10 per tonne. Imports of steel from South Korea and China continue to disrupt the market.
Fourth quarter prices have fallen sharply, in Poland, causing stock losses at the distributors. Domestic demand is stable. Participants in the Czech/Slovak markets report that business activity is reasonable. Strip mill product prices, in the domestic currency, are relatively steady. Nevertheless, customers are keeping inventories well under control, despite the air of optimism. The market is, as yet, not significantly disrupted by third country imports. Exports, to Russia, of finished goods have declined. This is particularly affecting the engineering sector.
Flat product selling values continue to fall in western Europe, driven down by low import quotations and decreasing raw material costs. Moreover, the differential between offers from suppliers in the north and south of Europe is too vast to be sustainable for any length of time. Activity remains subdued and buyers, believing that further price cuts are inevitable, are purchasing cautiously.
Source: MEPS International Steel Review – October Issue