Developing Markets Steel ReviewThe MEPS BRIC average transaction price, measured in US dollars, increased for all eight finished carbon steel product types published in MEPS Developing Markets’ Steel Review.

The Brazilian steel industry remains upbeat over the general outlook for 2014. Long product steelmakers have adopted more aggressive pricing positions. Local stockists have resumed monitoring the domestic-import price differential as a result. The steel distributors association (Inda) has reported that imports of flat steel products totalled 123,780 tonnes in February – an increase of 7.7 percent compared with the corresponding period last year.

Russian trading houses have queried whether the latest domestic steel price levels are supported by market and economic fundamentals. Active buyers are booking for only immediate requirements due to continuing price fluctuations. Shipments to tube fabricators, OEMs and mechanical engineering companies have performed below expectations.

Indian distributors remain cautious about the strength of underlying consumption in the April-June period. Deliveries to downstream industries were disrupted by the Holi festival and the close proximity of the general election.

The Chinese steel industry expects the second quarter to be a challenging trading period. Profit margins have been eroded by the ongoing overcapacity problem and the volatility of raw material prices. The China Iron & Steel Association (CISA) has reported that the aggregate daily output of crude steel by the leading mills in the first ten days of March totalled 2.097 million tonnes – an increase of 0.6 percent compared with the corresponding period in 2013.

Source: MEPS – Developing Markets’ Steel Review


International Steel ReviewAfter offering small price reductions in mid-February, US flat product producers became increasingly aggressive as they tried to secure orders from customers amidst a weather-related decline in general demand. Manufacturing, construction and auto have all been affected by the extreme conditions.

In Canada, prices have softened and further weakness is anticipated in the second trimester. Mill order books are acceptable, with Dofasco quoting May delivery. The depreciating Canadian dollar continues to keep imports to a minimum.

Despite early spring being, traditionally, a peak season for manufacturing in China, that sector is experiencing weaker growth. This has created negative sentiment in the steel industry. Furthermore, overcapacity is weighing heavily on the market, both domestically and globally. On a more positive note, inventories are declining.

Recent Japanese sales have been driven by higher demand for houses, cars and electrical home appliances, ahead of a sales tax hike in April. Consumption has also been boosted by public works expenditure.

The South Korean steel industry is in the midst of a prolonged slump, causing producers’ profits to tumble. In a climate of lacklustre demand, the mills are grappling with surplus supply due to domestic overcapacity and an influx of cheap Chinese material.

In Taiwan, major steelmaker, CSC, has said it will lift official domestic prices by an average of 0.37 percent for the April/May period, following a 1.2 percent increase in March. Although sales were subdued in February, the company expects demand to climb in the second quarter, which is, traditionally, the peak season for industrial output.

Steelmakers would like to impose an April advance in Poland but buyers do not believe the move is viable, given the present state of demand. In fact, selling values have weakened again during March. Forecasts for steel consumption later in the year are cautiously optimistic. Although very few import deals have been concluded, rumours of cheap offers are influencing domestic pricing in the Czech/Slovak markets.

West European producers have, so far, failed to close deals for the second quarter at the target prices they initially announced. Falling input costs have hindered the mills’ aspirations. Moreover, offers from third country sources are becoming more competitive, although the lengthy delivery lead times involved are still considered to be a big risk in today’s market climate.

Source: MEPS – International Steel Review


Independent Stainless Steel PricesThe forecast upturn in demand for stainless steel did not materialise during the first quarter of 2014. As a result, basis figures, net of alloy adjustments, have risen very little, if at all. However, recent increases in nickel costs have lifted stainless transaction values and kick-started purchasing activity.

The recent rapid rise in LME nickel figures has shown how speculators on the commodities markets tend to react in a more volatile manner than raw fundamentals would suggest.

The Indonesian mineral ore export ban has had a small effect since the beginning of the year, causing prices to climb slightly. However, other, conventional nickel producers have stepped up their output in order to reduce the shortfall. In fact, as MEPS has previously written, nickel supply continues to be in surplus relative to current demand. Furthermore, significant excess inventories remain, in LME warehouses and in other stockpiles – notably in China.

The nervousness of speculators has been exacerbated by the recent unrest in Ukraine and Crimea, which has led investors to panic over the outlook for the international availability of nickel from Russia. Again, the reaction of the market has been disproportionate to the real threat to nickel supplies.

The result of this activity is that the LME Nickel Cash price rose by over US$2000 per tonne between 25 February and 26 March, an increase of over 14 percent. Several metals quoted on the LME tend to follow the same, technically-driven trading patterns. However, the copper price, for example, which often follows similar trends to nickel, fell by around US$600 per tonne, or 7.5 percent, during the same period.

As a result of the rise in raw material costs, austenitic stainless steel transaction values have advanced in recent months and are likely to continue to do so in the short term. In addition, many market participants report positive signs, reflecting that consumption will increase, either due to seasonal trends or because of genuine, underlying economic recovery. This, together with the input price inflation, may enable producers to lift basis values, too.

This combination of factors will lead to some contradictory behaviour. Some stockists will build their inventories, hoping to sell material quickly, at a greater margin, while prices continue to rise in the near term. Others, such as OEMs, may have replenished their stocks during the early part of the year, when selling values were low. Now, with no need to buy large quantities, they may minimise their purchases, in the belief that prices will decline again within a few months.

Source: MEPS Stainless Steel Review


European producers of flat steel products have, so far, failed to close deals for the second quarter at the targSteel Prices in Europeet prices they initially announced. Falling input costs have hindered the mills’ aspirations. Moreover, offers from third country sources are becoming more competitive, although the lengthy delivery lead times involved are still considered to be a big risk in today’s market climate. Domestic steelmakers are hopeful that a small increase can be secured for orders placed over the next few weeks. Economic indicators remain good in several countries.

After a weak start to the year, demand from German end-users is now either stable or growing. However, customers are not yet ready to pay the proposed second trimester increase of €30/40 per tonne. Producers have already lowered their expectations to around €10/20 per tonne.

The French market has been described as lethargic, lacking dynamism, with stagnant average demand since January and even sagging end-user activity. In such conditions, it has not been possible for producers to lift their prices.

In Italy, market players are viewing the changing political environment with great caution. MEPS has noted a number of negative developments in the steel sector. End-user activity has slowed, creating pressure in the distribution segment. The mills have become more flexible in their attitude during price negotiations.

In the UK, the announced increases have not filtered through to the market. The strong local currency is working in the favour of importers, both from mainland Europe and from third countries. Service centres report that demand is still reasonably good but may have slowed a little.

In Spain, there is still pressure from domestic producers to lift basis figures for second quarter business but import offers are becoming cheaper. Consequently, for now, customers are reluctant to accept increases. End-users are also refusing to pay more to the distributors.

Source: MEPS – European Steel Review


The prevailing sentiment throughout the stainless steel supply chain is one of “cautious optimism” that 2014 will be a little better than 2013, in terms of both business volumes and profitability.

Market participants have been, for some time, expressing the view that activity and prices have been bumping along a prolonged bottom in the business cycle and that that situation is close to its end.

A number of major western industrial nations have begun to record encouraging economic indicators, such as positive GDP growth, increasing manufacturing output and falling unemployment. The Japanese government’s economic stimulus measures, or “Abenomics”, have, at least in the short term, boosted industrial activity in a market that has been in the doldrums for two decades.

MEPS forecast for crude stainless steel production anticipates growing output in all the traditional stainless steelmaking countries and regions – the EU, the United States, Japan, South Korea and Taiwan. This would be the first time this has happened since 2010. Furthermore, stainless steelmaking capacity continues to grow in the developing markets, despite existing oversupply. We, therefore, predict output in China and other emerging countries to continue to increase slightly faster than in the West.

Nickel values are expected to rise in the early part of this year, despite the enduring global surplus. The medium-term effects of Indonesia’s imminent ban on mineral ore exports remain uncertain. Meanwhile, further hikes in ferrochrome prices are foreseen during the first half of 2014. Although stainless steel suppliers have, so far, reported no sign of a significant upturn in order tonnages, the belief persists that there will be a moderate increase in activity in the coming months and that 2014 could be the industry’s best year for some time.

Source: MEPS –Stainless Steel Review


An upturn in steel prices in North America and the European Union at the end of the year, pushed the MEPS world composite benchmark steel price to its highest level since March.

US demand for flat products is stable but expected to show some signs of growth shortly. Inventories throughout the supply chain are tightly controlled at a low level. Ex-mill transaction values have continued to escalate over the last month. Producers’ scrap costs are also rising. With good order books for the first quarter 2014 and extending delivery lead times, the steelmakers may well endeavour to hike prices further in the coming weeks.

In Canada, mill rolling schedules are reasonably full with order placement now well into February. Transaction figures are firm and, in some cases, above those of the previous month. However, at the service centres, demand is still inconsistent. It is a struggle for them to pass on all the mill increases to resale customers, who are only purchasing what they currently need, rather than rebuilding stocks. Nevertheless, buyers believe there is still room for further price improvements.

The recovery in the Japanese economy continues, leading to healthy and growing steel consumption. Producers are slowly, but surely, securing their proposed price rises. Inventories held by dealers are now well controlled. Export figures are also moving up, helped by the weak yen, although volumes have fallen as demand in key Asian markets is dull. The depreciated currency is also discouraging cheap imports.

The basis increase scheduled by the West European flat products producers for the first quarter 2014 has not been secured for January production. Demand remains slow across the region. Negotiations for the remainder of period one are ongoing. Long product prices have advanced slightly as the mills take advantage of upward scrap movements.

Source: MEPS International Steel Review