STAINLESS STEEL PRICES AT CROSSROADS

Global stainless steel prices are going through a transitional stage. Transaction values in June were pulled in all directions by a variety of different market forces.Stainless Steel Review

After rising relentlessly since the beginning of 2014, the LME nickel price peaked in mid-May, at over US$21,000 per tonne. Values have fallen back since then, mostly fluctuating in a range between US$18,000 and US$19,000 per tonne in recent weeks.

Consequently, in markets that employ an alloy surcharge system based on the previous month’s raw material costs, notably in Europe and North America, effective prices for June are considerably higher than they were in May. In China, on the other hand, selling values respond more quickly to changes in input costs. MEPS figures for that country, based on market prices in the third week in June, are lower than they were four weeks earlier.

Moreover, there has been an increase in purchasing activity, in many markets, in the past couple of months. This may be supported by improving underlying demand or it could be driven by stock replenishment and technical buying during a period of rising prices. Producers in several countries have used these positive signs to support small basis price increases, in addition to the soaring alloy extras. Some mills are hoping for further increments during July.

However, as the price trend levels out, customers are less likely to make speculative purchases. Furthermore, stock building has been completed and business activity will slow in many parts of the world during the summer holiday and shutdown period. Consequently, suppliers may find it difficult to achieve further basis price increases in the short term.

The reversal in the direction of nickel costs has arrested the rapid rise in alloy surcharges for austenitic grades. Indeed, some producers’ July figures for type 304 flat products are slightly lower than those for June. This will only add to the usual, seasonal lethargy in stainless steel buying.

Supply chain participants will be hoping that the positive sentiment perceived in recent months is indicative of a real upturn in demand. Order tonnages in the weeks following mills’ and end-users’ summer stoppages will give some sign of the future direction of the market.

Source: MEPS Stainless Steel Review

STEEL PRICES REMAIN WEAK IN NORTHERN EUROPE – MEPS

Steel market participants in Scandinavia reported good levels of business activity in recent weeks. However, sales volumes in these countries are not sufficient to outweigh the disappointing situation in the wider region of Western Europe. Raw material European Steel Supplementcosts are low, demand across the continent as a whole is flat and the mills continue to operate at significantly less than their maximum capacities. As a result, prices are under negative pressure and average transaction values for most products have slipped, this month.

Consumption of strip mill products is fair but suppliers are meeting strong opposition in their efforts to lift prices. Offers from Russian sellers are not sufficiently cheap to be attractive, given the longer delivery lead times. The distribution arms of SSAB and Rautaruukki continue to compete for market share, prior to their proposed merger. This is keeping selling values low in Sweden and Finland. Large cold rolled coil customers are now negotiating contracts for the third quarter. The mills are unlikely to achieve better than rollover figures. The market for hot rolled coil is particularly flat and prices have fallen by more than those for the cold rolled product, in several countries. Processors of galvanised material continue to receive healthy order volumes from car manufacturers in the north and west of Europe.

Overcapacity at European mills and competition between stockists are limiting the profitability of producing and trading steel, despite improving economic indicators. The truck maker, Scania, is buying substantial volumes of plate, in Sweden. Demand from the construction sector is increasing, in some countries. The potential for price inflation is restricted by import offers from Eastern Europe.

In Sweden, demand for structural sections has held up well through the mild winter. However, demand is weak, in many countries, and there is stiff competition between sellers. As a result, ex-mill prices are down and distributors, too, must cut their transaction figures in order to secure sales. Demand for rebar is quite strong in Sweden. This is mainly driven by infrastructure schemes in the Stockholm area. On the other hand, government investment in new projects is at a low level, in most of Europe, and sales tonnages are decreasing slightly as the summer draws near. Although demand for merchant bar, from the manufacturing sector, has picked up in the last three months, there is plenty of material available and delivery lead times are short. Prices have softened, in June.

Source: MEPS European Steel Review Supplement

EU STEEL MARKET PRICES UNDER PRESSURE – MEPS

Activity in the European flat products sector is unseasonally quiet. Although underlying demand is slowly recovering in several

countries, it remains a buyers’ market. Mills have reported heavier order intake lately, as consumption strengthens but supply is still in surplus and delivery lead times quite short. Third country import prices are falling as iron ore costs move down. The

reduction in outlay on raw materials is also undermining domestic basis values.

Material can be delivered quite quickly in Germany. Mills are competing strongly for orders. Consequently, the proposed price rise appears to have been put on hold, although producers are not saying this officially. In fact, MEPS has noted some downward movements. Distributors, keen to manage their stocks, are only purchasing when they know they already have orders to fulfil.

News of the French economy is disappointing as manufacturing output fell in April. The steelmakers are looking for rises, offering material at higher prices. However, in reality, when a deal is made and steel is ordered, prices are at the same level as a month ago.

MEPS research showed no recent price improvements in the Italian market even though the producers are pushing hard for increases. Demand is static and, with the summer holidays approaching, companies are already destocking. Customers are waiting until the last possible moment if they need to buy. Delivery lead times are very short because supplying mills are not fully booked. If anything, the economy is likely to slow in July for seasonal reasons.

Although there is more confidence and optimism in the UK flat products market, some prices continue to drift, partly due to the strength of sterling which is encouraging cheaper imports from mainland Europe and further afield.

In Belgium, end-user demand is slower than was predicted at the start of the year. Both they and the distributors are keeping stocks to a minimum. Service centre resale values have been under pressure for several months, creating financial problems for some companies. Steelmakers have stopped trying to lift basis numbers and market players can envisage no movement before the holidays in July and August.

The business climate in Spain is improving, albeit from a low point. More credit is available from the banking sector and the government has provided some tax relief for companies. Steel demand is slowly reviving.

Source: MEPS – European Steel Review

MEPS PREDICTS AN AUTUMN RECOVERY FOR EU STEEL

The MEPS – All Products Composite EU Carbon Steel Price has fallen to a 51 month low in June, this year. Further sEUPressmall reductions are possible in the coming months. However, an upturn in steel selling values will be highlighted in the June issue of the company’s m onthly report, European Steel Review and the On-Line Steel Price Forecasting Service.

According to MEPS, the market is likely to continue to be plagued by low priced offers from steel producing countries in Asia and CIS, in the short term. Negative price pressure, from customers wishing to share in the mills’ declining steelmaking raw material costs, could also play its part. In contrast, inventories across the supply chain are modest. End users have been restricting their steel purchases, of late, to just those for immediate requirements. Buyers are holding out for possible lower offers in the coming weeks/months. For similar reasons, service centres have not been making speculative purchases.

MEPS expects mill activity to decrease over the summer months as the producers engage in plant maintenance. Supply of finished steel products is likely to weaken. The combination of reduced steel supply and lower inventories is expected to lead to some shortages after the holiday period. Customers will, almost certainly, start to place orders for new material as demand picks up. With fewer inventories through the steel supply chain, the mills should be able to obtain steel price increases in the latter part of the summer.

Source: MEPS – European Steel Review

Also See: MEPS – EU Steel Prices Online

STEEL PRICES IN BRAZIL – MAY 2014

Average domestic strip mill product prices in Brazil, declined by an average of 4 percent, month on month, in May-according to MEPS latest steel report Developing Markets’ Steel Review.Developing Markets Steel Review

Negative price sentiment persists in for Hot Rolled Coil. Local distributors report that key consuming industries are scheduled to either shut down or operate shorten working weeks during the World Cup 2014 tournament (starting June 12). Meanwhile, Asian import offers for June-July shipment stood at US$585/595 per tonne CFR São Francisco do Sul (excluding import duty).

The outlook for the Hot Rolled Plate market is unchanged. Local stockists have warned that current quotations are unattractive and run the risk of fuelling import activity. Most firms are wary of carrying too much inventory over the next two months. In week 21, plate quotations from Asia for June-July shipment were US$560/570 per tonne CFR Santos (excluding import duty).

Buying sentiment has weakened in the Cold Rolled Coil market, fuelled by slow underlying demand from the home appliances and automotive industries. The Ministry of Development, Industry & Foreign Trade (MDIC) has reported that imports of cold rolled coil totalled 35,942 tonnes in April, up 83 percent, year-on-year. The majority of this material is sourced from China. Offers from Asian mills for June-July shipment stood at US$685/695 per tonne CFR São Francisco do Sul – down 0.7 percent, month-on-month, (excluding import duty).

Hot Dipped Galvanised steel traders have reiterated that purchases from foreign mills will intensify if the domestic/import price premium continues to widen. The MDIC has reported that imports of galvanised products totalled 31,363 tonnes in April – down 31.9 percent, month-on-month. Offers from Asian suppliers for June-July shipment were US$715/725 per tonne CFR Santos (excluding import duty).

Source: MEPS Developing Markets’ Steel Review

HALF OF CHINA’S INCREASED STEEL OUTPUT IN Q1/14 WAS SOLD IN EXPORT MARKETS

Chinese steel demand growth is slowing down. This is partly due to high inventories throughout the supply chain but also a decrease in government investment. Despite this, output in th e first four months of 2014 increased by 2.7 percent compared with the same period last year. By historic standards, this is a modest rate of growth.ChinaJune

However, it is worth noting that approximately 50 percent of China’s increased, year-on-year, steel production in the first quarter of 2014 was exported. Moreover, imports of steel into China in the first quarter of this year are little changed from the figure in 2013.

This is bad news for steelmakers in the rest of the world. In the first three months of 2014, Chinese exports have increased by 22 percent, year-on-year. In the medium term, this will put negative price and supply pressures on domestic steelmakers in most other regions.

According to the latest data available, total exports of finished steel products by Chinese mills increased from 15.4 million tonnes in the first quarter of 2013 to 18.8 million tonnes in the same period of 2014 – a rise of 3.4 million tonnes. In the January to March period of 2014, output of finished steel totalled 192.3 million tonnes compared with 185.5 million tonnes in the equivalent time span in 2013 – a gain of 6.8 million tonnes.

China’s exports of finished steel products, in the first quarter of this year, were close to ten percent of the total output – the highest ever recorded. This level of export activity is likely to spark a new set of anti-dumping cases in the second half of 2014.

Source: MEPS China Steel Review