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Slow Seasonal Demand and Trade Sanctions Affect Steel Prices in Emerging Markets

Mexico

Mexican steelmakers continually pressed for increased prices, in July, but mills offered a degree of flexibility and discounting when deals were finalised. The recent depreciation of the national currency against the US dollar has exacerbated the situation. Meanwhile, the National Chamber of Iron and Steel Industry (CANACERO) lobbied the new government for tougher measures to protect the manufacturing and steel industries from foreign competition. The previous Peña Nieto administration imposed commercial import duties on US goods totalling US$3 billion.

Brazil

Brazilian steelmakers struggled to raise transaction values to distributors, in July. End-users remain risk averse. The majority plan to continue with cautious purchasing strategies. Price support from export demand is limited.

Russia

Russian trading houses plan to persevere with conservative inventory levels, reflecting a seasonal slowdown in end-user demand. They expect domestic suppliers will concede further price reductions, to fill their rolling schedules. Meanwhile, Russian steelmakers criticised the European Union’s decision to impose restrictions on imports of steel goods, this month.

India

Demand is tepid throughout India. Sales volumes have slowed in the country’s northern and central states. Stockists operating in these regions have begun to offer discounts to facilitate deals. Traditionally, the monsoon season ends in September. Both primary and secondary steel producers were wary to offer price reductions and more favourable payment terms, fearing such measures would be counterproductive.

Ukraine

The Ukrainian steel market is described as “steady but slow”, as the summer commences. Manufacturing activity has improved, although businesses are still reluctant to invest. The mills are targeting overseas markets to offload their surplus output.

Turkey

Difficult business conditions persist in Turkey. Producers would like to implement a domestic price advance, citing the depreciation of the Turkish lira against the US dollar and rising international prices, but, so far, this has not proved possible. Sales to end-users and distributors remain tepid.

United Arab Emirates

Emirati service centres are wary of carrying too much inventory during the summer months. They note that it is risky to conclude any deals, at present, because of volatile import price quotations. Moreover, sales volumes are forecast to decline further, in August and September, as warmer temperatures are likely to curb construction activity. Export opportunities are limited outside the GCC region.

South Africa

The South African market is very quiet, with little business activity of any significance taking place during the holiday period. Domestic buyers remark that their suppliers’ current initiatives to lift prices are ill-timed, counterproductive and would only escalate import tonnages. We note little appetite for purchasing, at present, among construction firms. Labour unrest and union difficulties add to the uncertain climate.

Source: MEPS Developing Markets Steel Review

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Brazil

Challenging business conditions persist in Brazil. Domestic buyers remark that the current initiative to lift prices is ill-timed, counterproductive and would only escalate import tonnages.

Russia

Russian trading houses are booking for only immediate requirements due to price fluctuations and working capital problems. Activity deteriorated further, once the 2018 FIFA World Cup started. Shipments to construction and infrastructure projects remain steady, but demand from the commercial and private residential building sector is weak. End-users continue to experience financial problems.

India

In India, steel distributors, operating in southern states, witnessed a fall in business activity with the early onset of the monsoon season. Buyers are reluctant to purchase finished steel material and are waiting for prices to decline. Meanwhile, the Modi government announced that it will impose retaliatory tariffs on US finished steel goods (effective August 4).

Ukraine

The prognosis for the Ukrainian steel market is unchanged. Bearish dealers prefer to wait and observe the current market situation. Buying sentiment is shaped by expectations of further price fluctuations. Exporters lifted selling figures, actioned by an upturn in the cost of billet, slab and steelmaking raw materials.

Turkey

Challenging trading conditions persist in Turkey. Deliveries to downstream steel consuming industries remain slow, amid weak post-Ramadan demand growth and political uncertainty stemming from the country’s presidential and parliamentary elections. Additionally, exporters report that the tariffs on steel, imposed by the United States, have increased the competitiveness of their finished steel products, relative to their Canadian, Mexican and European counterparts.

UAE

Emirati service centres are extremely reluctant to purchase material in, what they deem as, precarious business conditions. Shipments to the construction sector and pipe fabricators remained slow in the trading period. During the summer months, building activity is constrained by high temperatures. Export opportunities are limited outside the GCC region.

South Africa

The trading environment remains downbeat in South Africa. Distributors condemned the latest upward adjustments as “unwarranted” given the current trading climate. Construction activity in the public sector is at a standstill, at present, as the market awaits government decisions on new investments.

Mexico

Purchasing activity remains moderate in Mexico. The majority of local stockists are refraining from signing any contracts at the moment. Shipments of finished steel products to the United States have halted, this month, due to uncertainty over US trade tariffs.

Source: MEPS Developing Markets Steel Review

People also read: EU Steel Prices Slip As Purchasing Slows

Section 232 Continues to Cast a Shadow Over Emerging Steel Markets

Brazil

Brazilian steelmakers are optimistic about the strength of domestic consumption in 2018, highlighting improving market fundamentals in both the local and global steel markets. Additionally, Brazilian exports to the United States are temporarily exempt from measures related to the Section 232 investigation.

Russia

Negotiations in the Russian Federation remain arduous. Trading houses continue to be frustrated with the pricing positions adopted by their domestic suppliers. The latest initiative is viewed as unwarranted and not supported by underlying demand.

India

The Indian steel industry is forecasting that underlying demand will remain strong until mid-June, supported by government infrastructure spending and strengthening consumer demand. Nonetheless, MEPS notes growing resistance from end-users to the recent price increases. Moreover, the Modi government signalled it planned to formally lodge a trade dispute against the United States, at the World Trade Organisation (WTO), if the Trump administration does not exempt Indian steel goods from rising tariffs.

Ukraine

Supply chain participants report no changes to business activity, in the Ukrainian steel market. Stockists are concerned about carrying too much inventory over the next two months, fearing a downward price correction. Export activity is stable, with prices under renewed negative pressure following developments in the Chinese market.

Turkey

End-user demand in Turkey is tepid, disrupted by Mustafa Kemal Atatürk (National Sovereignty and Children’s Day), and renewed political uncertainty. Presidential and parliamentary elections are scheduled for June. The depreciation of the Turkish lira against the US dollar further exacerbated the situation. Scrap brokers predict that the domestic mills will try to push scrap prices down again in the near future, as both export and local demand remains slow.

UAE

Challenging business conditions persist, in the United Arab Emirates. Distributors are adopting a “wait-and-see” attitude, expecting purchasing activity to slow down ahead of the festive month of Ramadan. However, the outlook for the remainder of 2018 is positive, after the announcement of new commercial, residential and infrastructure projects, in Dubai and Abu Dhabi. Outside the GCC region, export opportunities are limited.

South Africa

South Africa’s Department of Trade and Industry (DTI) failed to persuade the US government to exempt the country’s steel and aluminium exports, from the tariffs, stipulated in the Section 232 proclamation. In further submissions, the ministry proposed a settlement based on 70 percent of the 2017 exports as a quota to the US. South Korea negotiated a similar quota arrangement with provisions, in late March.

Mexico

Mexican steel traders retain a cautious outlook for the second quarter. Downstream buying activity is unsettled by the aggressive pricing strategies adopted by domestic suppliers. Moreover, developments across the border in the United States continue to be watched carefully. Meanwhile, the National Chamber of Iron and Steel Industry (CANACERO) pressed the government for additional measures to protect the domestic manufacturing and steel industries from foreign competition.

BRIC STEEL PRICES CONTINUE TO SLIDE, IN FEBRUARY

BRIC steel prices continue to be under pressure because of weak demand, global oversupply and the recent introduction of EU trade protection measures.

In February’s issue of the Developing Markets’ Steel Review, MEPS reported that the BRIC average transaction price, slipped, this month, across flat and long products.

Brazilian long product prices reduced slightly as market activity remained muted. Following the introduction of the minimum import price framework, in India, buyers are hesitant to place orders.

Russian cold-rolled sales to the European Union are likely to contract as the authorities set preliminary antidumping duties. However, local producers largely secured higher transaction prices, in February. Steel export orders rose on the back of the weak rouble.

Furthermore, domestic transaction prices for Chinese flat and long products are expected to rise in late-February as activity ramps up, especially in the construction sector, following the holidays.

Source: MEPS – Developing Markets Steel Review – February Edition

BRIC STEEL PRICES TUMBLE FURTHER, IN JANUARY

BRIC steel prices continue to slide because of weak demand and global oversupply.

In the recent edition of the Developing Markets’ Steel Review, MEPS report that the BRIC average transaction price, softened, in January, across flat and long products.

Russian steelmakers offered discounted prices to secure mill output, in January, although we expect transaction values to rise next month. The Brazilian steel industry is being negatively affected by the poor economic climate domestically.

Turkish selling values mainly fell because of rising imports and muted demand.

However, domestic transaction prices for Chinese flat products advanced as local producers announced price hikes early, in January. As the Lunar New Year approaches, values have weakened as domestic consumption slows down.

Source: MEPS – Developing Markets Steel Review – January Edition

DEVELOPING MARKETS ROUNDUP FROM MEPS

The outlook for the Brazilian steel market remains precarious. Distributors are booking for only immediate requirements due to continuing price fluctuations and weak economic fundamentals.

Russian steelmakers have had mixed success in their efforts to advance transaction values. Local trading houses stress that the latest price initiative does not reflect real demand. Long product steelmakers have delayed releasing their October basis quotations.

Price volatility has hampered trading in India. Domestic steelmakers have continued to press the government to give locally manufactured primary steel products extra protection from third country suppliers.

Chinese steel prices have continued to trend downwards. Distributors have been reluctant to place new business, citing tepid end-user demand.

Ukrainian trading houses are booking for immediate requirements only, due to high inventory levels and in anticipation of further price reductions.

The Turkish steel industry has struggled to adapt to the muted domestic trading environment. Local service centres are extremely reluctant to purchase material in, what they deem as, tricky trading conditions.

The business climate in the United Arab Emirates is unchanged since our August report. Procurement activity by small and medium sized construction companies has stagnated. The downward movement in import quotations has made it too risky for them to do any deals at this stage.

Conditions in the South African market have exhibited little sign of improvement. Local service centres plan to persevere with conservative procurement strategies in October.

Source: MEPS – Developing Markets Steel Review – September Edition