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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

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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

DEVELOPING MARKETS HIGHLIGHTS – MEPS INTERNATIONAL LTD

Russian trading houses remain cautious about the strength of domestic demand in the September-October period. Meanwhile, long product steelmakers have delayed releasing their September basis quotations.

Business confidence amongst Indian dealers remains unsettled. The situation has been further aggravated by the different pricing strategies adopted by primary steelmakers. Meanwhile, the import tariff rate of the flat-rolled and steel products used in the automotive industry was lifted to 12.5 percent (previously 10 percent), with long steel products now at 10 percent (previously 7.5 percent).

The outlook for Ukrainian demand is unchanged. Distributors and traders have continued to purchase only for immediate requirements. Construction firms have remained hampered by working capital constraints.

The prognosis for the Turkish steel market remains poor. The Turkish Statistical Institute (TUIK), has specified that imports of flat finished steel products totalled 661,246 tonnes in June – up 17.5 percent year-on-year. The largest increase transpired in cold rolled coil imports (a rise of 10.5 percent).

Challenging trading conditions persist in the United Arab Emirates. Local stockists remain bearish over the growth prospects for steel consumption in the third quarter. It has become too risky for buyers to conclude any deals at this stage because of volatile import quotations.

The business environment in South Africa has remained difficult. Local service centres have forecast that domestic steel sales in the third quarter would be weaker than the previous trading period. Meanwhile, the South African Iron & Steel Institute (SAISI) has stated that imports of finished carbon and alloy steel products totalled 111,150 tonnes in June – up 2.7 percent, month-on-month. Finished flat products accounted for 93,300 tonnes.

Purchasing volumes in the Mexican market are forecast to be stable, at best, in September. Local steelmakers are expected to shadow the pricing strategies of their North American counterparts next month. Meanwhile, the National Chamber of Iron and Steel Industry (CANACERO) has reported that imports of finished steel, in January-June 2015, stood at 6.83 million tonnes – up 14.0 percent, compared with the same period a year ago.

Source: MEPS – Developing Markets Steel Review – August Edition

TURKISH STEEL MARKET ROUNDUP FROM MEPS INTERNATIONAL LTD

In Turkey, hot rolled coil selling figures have decreased, according to MEPS. Steel producers have continued to lobby for retrospective protection measures against imported hot rolled coil products.

Hot rolled plate buying activity has slowed down. Bearish stockists are keen to avoid carrying high inventory levels into Ramadan.

Turkey’s TUIK has reported that imports of cold rolled flat products totalled 65,108 tonnes in April – up 10.0 percent, month-on-month. The majority of this material was sourced from Russia and Ukraine, and is subject to a 10 percent import duty.

Business sentiment remains subdued in the coated coil market, deflated by Ramadan and the recent election outcome. Moreover, shipments to domestic automotive suppliers and producers have yet to recover from May’s labour strikes.

The wire rod market continues to be tough. Buyers have refrained from purchasing material, in anticipation of additional discounts.

Domestic demand has deteriorated in the structural sections market. The outlook is similar for rebar. Purchasing activity is weighed down by the result of the country’s parliamentary election (held on July 7) and the prospect of subdued demand during Ramadan.

Source: MEPS – Developing Markets Steel Review – June Edition

DEVELOPING MARKETS HIGHLIGHTS – FROM MEPS INTERNATIONAL LTD

Brazilian steelmakers have begun to lower production targets in reaction to weak underlying demand, high inventory levels and negative price sentiment. The Instituto Aço Brasil (IABr) has reported that finished steel sales in the home market during May totalled 1.49 million tonnes – down 1.3 percent, compared with the previous month’s figure. Meanwhile, the Brazilian flat steel distributor association, INDA, has indicated that imports of flat steel products totalled 175,757 tonnes – a fall of 19.6 percent.

The outlook for the Russian steel market is unchanged. Domestic steelmakers have delayed releasing their preliminary July basis quotations for both flat and long finished steel products.

Ukrainian trading houses remain bearish about the prospects for domestic steel consumption in the remainder of 2015. However, the local association of metal producers, Metallurgprom, has forecast that crude steel production in July will total 2.3 million tonnes – up 5.6 percent compared with May’s output figure.

Buying activity has slowed in Turkey. End-users have begun to press for lower prices, in view of the downward movement being witnessed in other global steel markets.

The trading environment has weakened in the United Arab Emirates. Stockists do not expect to witness a recovery until after the Eid holidays, which mark the end of the Ramadan festival. Local steel producers have also faced stiff price competition from Chinese, Indian and CIS suppliers.

In South Africa, deliveries to downstream steel consuming industries have slowed, amid negative price expectations and weak underlying demand growth. The South African Iron & Steel Institute (SAISI) has stated that imports of finished carbon and alloy steel products totalled 101,188 tonnes in April – down 28.7 percent, month-on-month.

Source: MEPS – Developing Markets Steel Review – June Edition