Rising Costs and Section 232 Drives US Stainless Steel Prices Upwards

Global stainless steel transaction values increased, in February, reflecting the rising cost of raw materials – in particular, nickel and ferromolybdenum. Buyers are, generally, optimistic about underlying demand but not sufficiently to agree to price hikes that represent more than the increase in the mills’ input expenditure.

Producers in the United States announced further discount cuts – or basis price rises – for flat products, to be effective from 1 March. In the light of the current supply/demand balance, it may be considered difficult for suppliers to justify this move, following other, recent increases. Indeed, end-users are already expressing their displeasure with the upward trend in transaction values.

Sellers, though, may be encouraged by the prospect of tariffs or quotas being applied to imported material, as a result of the recent Section 232 investigation. The report found that the United States’ government would be right to protect its domestic steel industry, on the grounds of national security. The U.S. President has been presented with a range of recommended actions, including tariffs or quotas to be applied to all, or a selected group of countries. He must decide, by 11 April 2018, which, if any, of these measures to implement.

Whilst it is not definitively clear that such measures would apply to any, or all, stainless steel products, the potential effects are already being seen. Buyers are reluctant to place orders on overseas suppliers – especially from the countries that may be subjected to the most severe restrictions – mindful that tariffs could be in place by the time this material arrived.

The implementation of these measures would lead to a realignment in international stainless steel movements. Producers in East Asia, in particular, would need to seek out new markets, to replace the tonnages currently sold to the United States. A number of European mills also make regular shipments, across the Atlantic Ocean.

Source: MEPS – Stainless Steel Review – February 2018 Issue

Finished Steel Selling Figures Rise in Emerging Steel Markets

Brazilian steelmakers remain optimistic about the growth prospects for domestic steel consumption. However, service centres and traders are concerned regarding the upturn in the pricing positions being adopted by their domestic suppliers. The majority assert that the latest initiative is unsustainable and does not reflect real demand. Meanwhile, the Instituto Aço Brasil and the Ministry of Foreign Trade (MDIC) expressed their reservations about the US Department of Commerce’s Section 232 investigation.

Trading volumes were stronger than forecast, in the Russian Federation, this month. The local distribution chain brought forward their procurement programmes, in anticipation of further price increases from domestic suppliers. Traditionally, the construction season commences in mid-April.

Business confidence is unchanged in India. Local service centres are reviewing their inventories and are very cautious about order placement. The rise in the buying price has not yet been reflected in distributors’ sales to end-users. Meanwhile, exporters plan to observe the global reaction to the re-opening of the Chinese market, before closing any new deals.

Challenging trading conditions persist, in Ukraine. Distributors found it difficult to pass on last month’s price adjustment to their domestic customers. Tight lending conditions continue to hamper investment in construction and infrastructure projects. Moreover, export markets are difficult.

In February, Turkish steel distributors questioned the necessity of the latest round of price hikes. The majority of these firms plan to keep stocks to a minimum and only procure material on a requirement basis. Speculation is rife that local steelmakers will push for higher prices, in March. Meanwhile, Turkish exporters conveyed apprehension, following the disclosure that the US Department of Commerce’s Section 232 report advocated, as an option, that steel products from Turkey should be subject to a 53 percent import tariff.

In the United Arab Emirates, market sentiment is poor amidst tepid demand. Although inventories are quite modest, many distributors are able to wait before ordering more material. Local forecasters expect demand in 2018 to remain relatively unchanged from the previous year. Export opportunities are limited outside the GCC region.

Purchasing volumes, in South Africa, are forecast to be stable, in the next trading period. Local service centres and traders are optimistic that the business environment will improve under President Cyril Ramaphosa’s tenure. However, mining-related sales and construction demand are slow. Previously, state-funded social housing building and infrastructure programmes failed to fulfil expectations of market participants.

The business climate, in Mexico, remains tepid. End-users are expected to source more foreign material, blaming their domestic suppliers’ unrealistic price demands. Additionally, the National Chamber of Iron and Steel Industry (CANACERO) called for the Mexican government to impose equivalent and reciprocal trade restrictions, on steel imports from the United States, if local producers are, in any manner, penalised under the Section 232 probe.

Source: MEPS – Developing Markets Steel Review – February 2018 Edition

The MEPS Global Steel Price Escalates 16 Percent Year-on-Year in February

The upward trend in global steel values continued in February – with North American and European flat product steelmakers securing a vast proportion of their tabled price hikes, owing to improved market fundamentals.

From MEPS research, in February, many North American and European steel buyers report that rising international selling figures aided the latest price advances. Domestic steelmakers were given the opportunity to lift values, in the absence of competitively priced alternatives, notably from Far East suppliers.

Steel manufacturers, in China, took advantage of government closures of local induction furnaces and improved demand conditions to raise domestic prices significantly, in the second half of 2017. Consequently, less material is available for overseas markets. Export volumes slumped by 30.5 percent, in 2017, year-on-year.

Following a surge in late November/early December and a subsequent downward correction in late December/early January, Chinese steel selling figures stabilised, ahead of the Lunar New Year. In the post-holiday period, it is likely that local values will move up, owing to restocking activity.

Amid stable demand projections, for 2018, MEPS expects Chinese prices to reach their peak, mid-year, as a consequence of the withdrawal of the winter production restrictions, in mid-March. It is reported that electric-arc melted material will be introduced to replace the lost induction furnace output. Consequently, Chinese production is expected to rise, in the second trimester of 2018. This could threaten the sustainability of the current global steel price recovery.

Source: MEPS – International Steel Review – February 2018 Edition

Hot and Cold Rolled Coil Prices Move Up in the Nordic Region

Demand for hot rolled coil is strong, in Denmark. Western European mills state that they have sold all of their rolling capacity for the first quarter and much of the second. Sales tonnages were high, in Sweden, in January and February, and forward order loads are healthy. Vehicle manufacturing is buoyant. In Finland, purchasing activity was quite consistent, through the Christmas and New Year period. The hot rolled coil market, in Norway, is described as stable, and a little quiet.

Buyers of cold rolled coil, in Denmark, were forced to pay at least an additional DKK100 per tonne, in January, compared with the previous month. Certain mills are now quoting for May deliveries. Demand from the manufacturing segment – particularly, automotive – is strong, in Sweden. Ex-mill values are climbing but stockists and service centres are struggling to pass increases on to their customers. Cold rolled coil consumption is robust, in Finland. Producers’ selling figures climbed, slightly, this month. Sellers in Norway report strong demand from regional carmakers. Prices are unchanged, in NOK terms, although the local currency has strengthened, relative to the euro.

Source: European Steel Review Supplement – February 2018 Edition

EU Plate Prices Climb on Reduced Import Volumes and Elevated Slab Costs

Further upward pressure on European commodity grade plate prices was noted, in February. Rises of between €20 and €50 per tonne were implemented, depending on the source of supply. Slab costs continued to escalate. Plate imports are less disruptive than of late, as overseas quotations move up.

In Germany, an upward price adjustment was secured, this month. Stock replenishment is underway at several large distributors. Sales to the earthmoving and mining sectors have strengthened. Overall demand is stable. In the linepipe market, where several large projects will be finalised during 2018, some uncertainty regarding future activity levels is developing.

French selling values rose, in February. Further increases are anticipated by buyers, to offset more expensive slab costs. Nonetheless, distributors struggle to pass on the mill hikes to their customers. Although major stockists and fabricators booked significant quantities, in December, they are looking to purchase again as delivery lead times are quickly increasing.

Slab feedstock is expensive and difficult to secure, forcing Italian rerollers to instigate price increases, this month, for finished products. The economy is improving and, with it, sales of plate.

End-user demand in the UK is relatively quiet, at present, although a number of service centres report better sales volumes. The full implications of the collapse of construction giant, Carillion, are unlikely to be felt until the end of the first quarter. Market values moved up in the last few weeks. Offers from continental Europe and from India are higher than those for local material. Strong competition continues to blight the distribution sector, with many stockholders working on very low margins.

Belgian figures were boosted, as a result of relatively good consumption, rising slab costs and expensive import quotations. In Spain, domestic prices rose. Offers from India are considered to be too costly, at present.

Source: MEPS – European Steel Review – February 2018 Issue

European Steel Prices Rise as Foreign Competition Wanes

Strip mill product basis prices continue to move up in northern and southern Europe, in February. Regional producers propose further rises, in order to achieve their new target values. Imports are playing only a minor role in the market, at present, as a result of trade defence measures and unattractive quotations from third country suppliers. Delivery lead times from domestic steelmakers have extended, although no shortages are reported. Underlying consumption is strong, in most countries. Moreover, distributors are restocking. Nevertheless, buyers remain cautious.

In Germany, domestic mill delivery lead times continue to lengthen. Order intake is good, certainly through the first half of 2018. Service centre inventories are reasonable. Imports from third country sources are available but their prices are too high to be competitive. Recent business was negotiated at figures above those reported in January, but not yet at the new target levels set by the domestic mills.

End-user activity is still at a good level, in France, even though purchasing in January started slowly. Distributors are now well stocked, as significant quantities of material were ordered at the end of last year, some of which is still being delivered. Mills implemented price rises towards the end of January and are now demanding more. Activity is strong in all steel-consuming sectors, with delivery lead times stretching to May/July. Import offers are currently in line with domestic prices.

Italy’s manufacturing sector enjoyed a strong start to 2018, registering the highest growth in output since early 2011. Steel inventories are reduced. The improvement in purchasing is supported by a recovery in real demand and a degree of restocking. Expectations for the first half of 2018 are good for both the auto and mechanical engineering sectors. Construction activity shows only slight progress. Flat product prices escalated, in February. Supplying mills are full, or overbooked. Delivery delays are reported and lead times have rapidly lengthened. Attractive third country import offers are scarce.

Manufacturing growth slowed, in the UK, in January. Inventories at the service centres are reducing and port stocks are at their lowest for several years. Third country quotations are limited and those that do exist continue to be more expensive than domestic offers. The mills implemented higher basis prices for second trimester deliveries. Service centres complain that resale values are not satisfactory, even on steel procured before the hike. Consequently, they only purchase for their immediate needs.

Belgian demand is brisk and customers are optimistic regarding future business levels. Domestic steelmakers pushed, successfully, for price advances for deliveries at the beginning of the second quarter. Competitive offers from third country suppliers are scarce. Quantities from European mills are also limited, with delivery lead times extending into the second trimester and beyond. Buyers expect values to be even higher when the next round of deals are finalised. Resale prices are also climbing.

Business conditions in the Spanish manufacturing sector continued to improve markedly at the start of 2018. Distributors of strip mill products are busy. However, it is still a struggle for them to recover the escalating ex-mill costs from their customers. In February, buyers settled orders for their second quarter deliveries at higher prices than in the previous month. As European basis numbers continue to move up, a number of companies are starting to consider buying imported material.

Source: MEPS – European Steel Review – February 2018 Issue