Rising Input Costs Trouble Steel
Mills in Emerging Markets
The prognosis for the
Brazilian steel market is unchanged. The trading environment in the Brazilian
steel market remains challenging. Distributors and stockholders, eager to keep
their inventories low for the rest of the year, are purchasing cautiously. The
current weakness is expected to continue into the first trimester of 2020.
However, the domestic mills are actively looking for an opportunity to boost the
selling values of their finished steel products.
Procurement activity, in the Russian Federation, this month, is below that
witnessed in October. Distributors are wary of holding excessive inventory over
the approaching winter trading period. The downtrend in domestic consumption is
expected to gather momentum next month. High borrowing costs are suppressing
Business sentiment is mixed in the Indian distribution network. Sales are
inconsistent and, with mill prices starting to move up, stockholders are only
buying for short-term requirements. Domestic mills are trying to lift selling
values to a level that is profitable. Support from offshore buyers is limited.
Sentiment is stable in the Chinese steel market. Construction demand is healthy,
at present, but is forecast to weaken, in December, with the onset of winter
weather. Production restrictions, in the northern provinces, are curbing
finished steel product inventories. Traditionally, domestic consumption, is
tepid, until after end of the Chinese New Year festival (from January 25 to
February 8, 2020).
The business environment is mixed, in Ukraine. Several service centres have
implemented their winter trading protocols, in order to, either free up working
capital, or minimise their inventory levels. Support from foreign demand is
limited. The local association of metal producers, Metallurgprom, reports that
finished steel production, in October 2019, totalled 1.431 million tonnes – up
5.1 percent, month-on-month.
Downstream demand, in Turkey, is sluggish as buyers adopt a cautious attitude.
Stockists, trading flat products, plan to closely monitor the price charged by
the local suppliers relative to the cost of imports, before deciding where to
place their orders. Producers, operating electric arc furnaces, would like to
secure further price increases to offset rising scrap costs.
Business confidence is muted, in the Emirati steel market. Demand is tepid.
Distributors and end-users are holding off purchasing, until January, to see how
demand develops. Despite this, Emirati rolling mills are planning to increase
their selling figures for December production, citing the uptrend in the cost of
key steelmaking raw materials.
We detect little sign of recovery in South Africa. Few deals are being
concluded. The country is entering a period of low seasonal demand. MEPS’
research found that dealers are expecting transaction values to decline, either
next month or in January 2020. Moreover, shipment volumes to downstream
industries are forecast to remain weak after the country’s Christmas shutdown
The Mexican steel market is exhibiting no signs of a substantial improvement in
demand, in November. Price developments in the neighbouring United States, are
having a negligible impact on the local transaction values. We detect reluctance
on the part of end-users to commit to forward orders. Local trading houses
intend to maintain cautious buying next month, as a result. Third country import
prices are not particularly attractive.
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