US Steel Prices Expected to Recover in Second Half of 2019

US flat product steel prices have been in a steady state of decline since the mid-part of 2018. A gradual uptick in domestic capacity utilisation was a contributory factor to the price erosion. Imported volumes remain an influence, despite the protection of Section 232 measures. 

According to MEPS’ research, in July, the majority of US steel market participants believe that the bottom of the pricing cycle has now been reached. In an attempt to prevent further cuts, US mills announced two list price hikes, totalling US$80 per short ton. Local buyers, who were strongly opposed to the initial mill pricing initiative, started to place third trimester orders, in anticipation of rising selling values. This led to an uptick in mill bookings. 

A number of US producers strengthened their pricing claims, by announcing their intention to idle blast furnaces during the summer months. Escalating iron ore costs are squeezing the margins of the integrated mills, relative to the scrap-based steel manufacturers. It is widely acknowledged that US mills would need to reduce supply, to align themselves with current demand requirements, if the recent pricing proposals were to be accepted by the market. 

MEPS projects that US selling figures will recover in the second half of the year. Transaction values are likely to be supported by low inventory levels and tightening supply. A revival in scrap costs is expected, in the same timeframe. This should exert upward pressure on steel prices.

Source: MEPS International Steel Review

Negative Sentiment Continues to Suppress European Steel Prices

The success of price hikes, by European steel producers, is muted. Mill profit margins are unsustainably low, as a result of rising input expenditure. Iron ore costs continue to soar, and those for coking coal remain at an elevated level. Moreover, European steelmakers are battling with increased outlay associated with CO2 emissions. The imperative for steel producers to lift selling values is becoming more acute.

Nonetheless, sentiment amongst steel buyers continues to be negative. Heightened uncertainty, which has been witnessed for the majority of the past eighteen months, persists. Brexit, escalating global trade tensions, slowing economic growth and softening demand, amongst many other factors, have combined to create a scenario in which both end-users and steel distributors are keeping their purchases to a minimum.

Import offers from third country suppliers are, generally, considered uncompetitive, when compared with the prices that can be negotiated with local mills. Nevertheless, substantial volumes of foreign material, in certain steel product categories, that had been stored at the ports, were released when the new quota period opened on July 1. Meanwhile, supply chain participants continue to await the outcome of the European Commission’s review of the safeguard measures. An announcement is expected in mid-August.

Source: MEPS International LtdMEPS European Steel Review

Emerging Economies Transform the Global Stainless Steel Market

The shape of the international stainless steel market has changed, in recent years. Burgeoning economic growth, in the developing world – particularly, in Asia – has contributed to growing global production overcapacity, relative to demand. In turn, the number of protectionist trade measures has increased.

China’s crude stainless steel output soared from 2 percent of the worldwide total, in 1999, to more than 50 percent, in every year since 2014. India’s production capability has increased, rapidly, in recent years, while countries such as Indonesia, Malaysia and Vietnam are now providing significant tonnages of finished steel.

While, of course, the economic development of these countries leads to growing domestic consumption, the expanding stainless steel production exceeds this demand. Consequently, extra material is introduced into the international market.

Although the United States and South Korea have maintained very moderate growth rates, in the twenty-first century, the other established stainless steel producing countries have recorded shrinking output figures, since the peak year of 2006. Japan’s outturn, in 2018, was 20 percent below that reported 12 years earlier. The European Union’s annual production fell by 23 percent, during the same time period, while Taiwan’s output was slashed by 32 percent.

Many countries or trading groups have sought to protect their home markets from imports, with restrictive or punitive measures. Antidumping duties have become increasingly widespread.

The United States’ implementation of Section 232 tariffs and quotas, in March 2018, triggered consequential actions. The European Commission’s safeguarding measures, for example, sought to prevent diversion of materials previously destined for the US market, by setting import quotas at the prevailing levels.

As industries in the emerging markets grow, their major players extend their influence, internationally. Chinese producer, Tsingshan Iron and Steel, caused ripples in the global stainless steel trade, with its development of a new large-scale production unit in Indonesia. The plant’s output has introduced substantial tonnages of competitively priced material onto world markets.

Tsingshan recently announced its plan to invest in a new cold rolling facility in the city of Busan, in South Korea. The local government, in Busan, welcomed the move, as a prospective boost to the ailing regional economy. However, the projected output, of 600,000 tonnes per year, would substantially distort the local market. The announcement led to objections from domestic stainless steel producers and processors, as well as trade bodies. Local people have taken to the streets, in protest against the proposed plant.

Source: MEPS Stainless Steel Review – June 2019

Uncertainty and Price Volatility Dampens Steel Demand in Emerging Markets

Business sentiment is unsettled, in Brazil. Distributors and end-users are frustrated with the increased transaction values proposed by their domestic suppliers. The latest initiative, delayed until July, is viewed as excessive.

The business climate is challenging, in the Russian Federation. Inventory levels are being controlled, throughout the supply chain. We note a reluctance on the part of end-users to commit to forward orders. Price support from export customers is limited.

In India, steel distributors, operating adjacent to the Bay of Bengal, witnessed a fall in business activity, due to the onset of the monsoon season. We note little appetite for purchasing at present amongst construction firms. Both primary and secondary steel producers are reluctant to offer price reductions and more favourable payment terms, fearing such measures would lead to further negative price expectations. Traditionally, the monsoon season ends in September.

The trading atmosphere is unchanged, in Ukraine. Manufacturing activity is still tepid. Businesses remain reluctant to invest. The export market is very competitive. The local association of metal producers, Metallurgprom, report that finished steel production, in May 2019, totalled 1.741 million tonnes – up 4.6 percent, month-on-month.

Demand is tepid throughout Turkey. Service centres and distributors are reluctant to purchase as they would like to get a clearer picture of the market. Local end-user consumption is weak. No upturn in market activity is foreseen until the end of the summer, at the earliest. The mills are targeting overseas customers to offload their surplus output.

Difficult business conditions persist, in the United Arab Emirates. Market confidence is still lukewarm. Sales to end-users and distributors are weak. Producers considered implementing a domestic price advance, but, so far, this has not proved possible. Traditionally, sales volumes decline in August and September, as warmer temperatures curb construction activity. Export opportunities are limited outside the GCC region.

The outlook is unchanged in the South African steel market. Steel distributors are extremely reluctant to purchase material in the current business conditions. Activity in the public sector is lacklustre, at present, as the market awaits government decisions on new construction and infrastructure projects.

The prognosis for the Mexican steel market is unchanged. The business environment is unpredictable. Buying sentiment is being shaped by expectations of further significant price fluctuations. Service centres are reluctant to conclude contracts, due to weak orders from construction and manufacturing companies. Meanwhile, shipments of finished steel products to the United States have resumed, this month.

Source: MEPS Developing Markets Review

Fierce Competition in Growing Southeast Asian Steel Market

In many parts of the world, the outlook for growth in steel demand is quite modest. However, the region that continues to buck the trend is Southeast Asia. This area is a steadily developing market. All ASEAN countries recorded positive growth in 2018 – with similar projections expected, this year. Increased activity from the construction sector continues to be the catalyst for the rise in steel demand. 

Last year, a double-digit percentage increase in ASEAN steel production was noted. The ramp up of local facilities, such as Vietnamese steel manufacturer, Formosa Ha Tinh Steel Corporation, partially helped to provide the uptick in regional output. Nevertheless, Southeast Asia continues to be a significant net importing region for steel products – with China being the main source of supply. 

Despite a slowing domestic market, Chinese steel manufacturers continue to produce record amounts of steel. As a result, Chinese mills will inevitably turn their attention to traditional export markets, such as ASEAN, to sell their excess supply. Amid growing competition, both locally and from other steel exporting nations – notably Turkey, Russia and India – MEPS   anticipates that Chinese producers will reduce their export prices, in order to maintain their market share, in the region. This is likely to have a dampening effect on values across the region, for the remainder of the year.

At the recent South East Asia Iron and Steel Institute event in Bangkok, the consensus view of conference attendees was that ASEAN steelmakers may fail to capitalise on the rise in regional consumption, due to fierce foreign competition. Several Southeast Asian steel producers successfully petitioned to implement trade protection measures. However, this has, largely, failed to stem the flow of imports into the region. Chinese, Japanese and South Korean producers, in particular, continue to invest heavily, in steel manufacturing, in the region. However, it is reported that this level of foreign intervention may be to the detriment of regional mills. 

It is widely expected that Southeast Asian steel values will be under negative pressure, in the coming months. This is, partly, due to the likelihood of reduced import price offers from Far East suppliers, notably China. In the longer term, MEPS predicts that the ASEAN region will continue to be an attractive proposition for traditional steel exporters, amid stagnant growth projections, in the majority of steel-consuming countries. 

Source: MEPS International Steel Review – June

Hyundai Steel Awards SMS Group Order For Revamp Of The Heavy Section Mill at Incheon

After successfully completing the commissioning of its new horizontal straightening machine, Hyundai Steel has awarded SMS group a follow-up order for the revamp of its Incheon heavy section mill in South Korea.

With this revamp Hyundai Steel aims to expand its product range towards larger sections with webs of up to 1,100 millimeters and sheet piles up to a system height of 800 millimeters. SMS group takes up this challenge as the leader of a consortium with Hyundai Rotem, a subsidiary of Hyundai Motor Group.

As part of the project, various new functions will be added to the existing two-high breakdown mill stand and a new sideguard manipulator will be installed.

The rolling line downstream of the breakdown stand will be replaced by a new CCS®(Compact Cartridge Stands) tandem group and one additional CCS® finishing stand. The stands will feature nominal rolling forces of 12,000 kN for the horizontal rolls and 8,000 kN for the vertical rolls.

The CCS® stands will reduce the maintenance effort, and enable a shorter roll change time and higher rolling speeds, while achieving better tolerances.

Commissioning of the new rolling line is scheduled for October 2020.

With an annual crude steel production of 24 million tons, Hyundai Steel is one of the ten largest steel producers worldwide, supplying its products predominantly to the automotive, shipbuilding and general construction industries.

Source: SMS Group