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

BRIC STEEL MARKET ROUND-UP FROM MEPS

The MEPS BRIC average transaction price, measured in US dollars, increased in only three of the eight finished carbon steel product types published in MEPS Developing Markets’ Steel Review.Developing Markets Steel Review

Brazilian distributors are forecasting underlying demand to soften in the June-July period. During the FIFA World Cup tournament, key downstream industries intend to either shutdown or operate a reduced number of shifts. The Instituto Aço Brasil (IABr) has reported that domestic sales of finished steel products totalled 1.78 million tonnes in April – an increase of 5.4 percent compared with the corresponding period last year. Flat steel products accounted for 994,100 tonnes.

The Russian steel industry remains optimistic over the general outlook for consumption and production in 2014. Shipments to construction and infrastructure projects are forecast to remain upbeat in June. Bullish internal producers have begun reducing their discounts and enforcing stricter payment terms.

In India, the Supreme Court has issued an interim order to temporarily suspend mining operations at 20 iron ore mines in Odisha state. Internal steelmakers have warned that any delay in renewing these licences would tighten iron ore supplies and fuel higher steel prices. The Joint Planning Committee (JPC) has reported that domestic consumption of finished steel in April totalled 5.84 million tonnes – an increase of 3.4 percent, year-on-year.

In China, business confidence has deteriorated, in May. Chinese steel traders are booking material for only immediate requirements, in anticipation of continuing price reductions. The China Iron & Steel Association (CISA) has reported that the daily output of crude steel by the leading mills, in the first ten days of May, totalled 1.824 million tonnes – an increase of 1.6 percent from the last ten days of April.

Source – MEPS Developing Markets’ Steel Review

AUSTENITIC STAINLESS STEEL PRICE HIKES DRIVEN BY HIGHER NICKEL COSTS – MEPS

The upward trend in nickel values, which has been in place since the beginning of 2014, has contributed to a substantial increase in stainless steel prices in May. Following the very rapid rise in nickel figures during the past month, transaction values for austenitic grades are predicted to climb even more steeply in June.Stainless Steel Review

The LME nickel price peaked at over US$21,000 per tonne on May 13, an increase of more than 50 percent compared with its low point, below US$14,000 per tonne, in early January. In the immediately preceding week, the nickel value had rocketed by around US$2,000 per tonne, or 13 percent.

As a result, alloy surcharges for grade 304 flat products, in Europe and the United States, will be about 25 percent higher in June than they were in April and 38 percent more than the January figures.

The main driving force behind the soaring nickel price has been the Indonesian government’s ban on exports of unprocessed ores, which came into effect in January of this year. The threat of the ban had little advance influence on nickel values, as speculators were unsure how firm the government’s stance would be.

Even after the ban came into effect, there was no panic among commodities traders, as observers remarked upon the stockpiles of nickel ore held by processors, particularly in China. Furthermore, LME nickel inventories continued to run at historically high levels. However, the upward pressure on nickel values became stronger as market players assessed the medium-term repercussions of the ban. Both technical and fundamental factors pointed to positive movements and the upswing in nickel prices accelerated.

As the Indonesians had hoped, a number of nickel processing plants are planned or already under construction in the country. In the short term, however, Chinese nickel pig iron production is predicted to fall by around 100,000 tonnes, this year, and possibly twice that amount in 2015. Consequently, the global surplus in nickel (production versus consumption) will be cut drastically in 2014 and may even move into deficit next year.

Therefore, despite the recent significant gains, MEPS believes that the medium-term prospects for nickel prices continue to be positive. The new floor value is likely to be around the US$18,000 per tonne mark, rather than the lower figures recorded during the past two years.

Source – MEPS Stainless Steel Review

STEEL PRICE HIKE IN U.S. HEIGHTENS IMPORT THREAT FROM CHINA

US flat product producers have successfully implemented at least a proportion of their latest round of proposed increases. However, the upward movements now appear to have stalled. Local supply is slowly returning to normal and the recent hikes, together with expanding domestic delivery lead times, have spurred an interest in imported material.International Steel Review

Canadian transaction values are unchanged from April, with some market participants anticipating a little softening during June, once regular supply is resumed. Production problems, at several mills, have kept things tight.

Chinese domestic prices continued to head downwards, following the May 5 Labour Day holiday. The cuts are being driven by excessive production capacity, falling raw material costs and slower manufacturing growth. Nevertheless, forecasts suggest that steel demand is set to improve as construction and manufacturing activities pick up for seasonal reasons.

In Japan, the supply/demand balance is improving. Since the Golden Week holidays (April 29 to May 5), shipments have increased, thus reducing inventories. Export volumes continue to trend downwards due to severe oversupply in the Asian region. Meanwhile, imports from China, Taiwan and South Korea are climbing, attracted by healthy Japanese demand.

In South Korea, a lack of sales opportunities in an extremely competitive export environment is being aggravated by the appreciation of the won. MEPS has noted no improvement in demand, which remains lacklustre, amidst surplus supply resulting from domestic overcapacity and an influx of cheap Chinese material.

The rebound in Taiwanese prices, experienced earlier in the year, has been blunted by a steel glut on the Chinese mainland which is creating import pressure. Moreover, local market demand has slowed due to a contraction in manufacturing output.

In Poland, steelmakers have, once again, reduced transaction figures in a climate of poor demand. Forecasts for steel consumption later this year remain cautiously optimistic. The economic recovery continues in the Czech Republic, helped by the devaluation of the local currency, which has boosted exports of finished goods.

In Western Europe, trading volumes of flat products have been slow since MEPS’ April report, due to a number of Easter and Labour Day holidays. Only minor price changes have been noted. Overcapacity, negative sentiment and increasing third country competition persist, enabling buyers to resist mill efforts to impose increases. Nevertheless, macroeconomic forecasts are optimistic in several countries, encouraging producers to slightly raise some of their offers.

Source – MEPS International Steel Review

PLENTIFUL SUPPLY KEEPS EU STEEL PRICES IN CHECK – MEPS

Trading volumes of flat products have been slow since MEPS’ April research due to a number of Easter and Labour Day holidays in Western Europe. Only minor price changes have been noted. However, overcapacity, negative sentiment and increasing third country competition persist, enabling buyers to resist mill efforts to impose increases and, in some instances, to win small discounts. Nevertheless, macroeconomic forecasts are optimistic in several countries, encouraging producers to slightly raise some of their offers.

Strip mill product prices have weakened slightly in Germany, despite a relatively healthy business climate and improved consumer confidence. Supply and demand are out of balance. The market is being targeted by producers in other EU countries, where demand is less robust. Customers feel that steelmakers’ talk of price rises is just wishful thinking. Service centres, uncertain of market developments, continue to keep stocks low. Resale values are poor.

Activity has remained subdued in France, partly due to the Easter break and two public holiday weekends at the beginning of May. Producers have stabilised market prices and even raised some of their offers by €5/10 per tonne but buyers believe the outlook remains uncertain. End-user demand on distributors is muted and resale values are dismal.

The Italian market has been particularly quiet because of a large number of holidays over the last month. Despite several announcements by steelmakers, who are still officially proposing increases, basis figures have not picked up. However, generally, they have stabilised, although the mills are ready to negotiate if presented with a large, firm order.

UK basis figures appear to have bottomed out. However, the mills’ attempts to instigate a rise were totally unsuccessful. Service centres report that demand is holding up and that prices do not reflect the reasonably healthy market. Clearly, there is an issue regarding the exchange rate which is creating a favourable situation for overseas suppliers from mainland Europe and further afield.

MEPS has noted very little price movement in Belgium, where activity levels are flat. Business, overall, is quiet with several end-users experiencing payment difficulties. Market participants foresee no change until the autumn. In Spain, steelmakers have stopped demanding their proposed €20 per tonne hike. There has been some recovery in demand, albeit only small. Inventories at the distributors are slightly higher than necessary, so buyers are in no hurry to purchase more material, especially as the summer holidays are approaching.

Source – MEPS European Steel Review