RAW MATERIAL COSTS PUSH THE DEVELOPING MARKETS' AVERAGE STEEL PRICE HIGHER

Trading activity in the Turkish market has remained downbeat. Local long product steelmakers have struggled to sell material at their cost of production either at home or in their export markets. Output levels are now more than likely to be downgraded in February. In the flat product segment, Erdemir reduced its cold rolled and hot dipped galvanised basis list values in early January. The adjustment has made the mill more competitive domestically and should enable it to sell its February production.

Purchasing activity in the UAE is unlikely to rebound before the final quarter of 2010. Demand in Abu Dhabi is forecast to be more upbeat than Dubai. In both Emirates, bearish end-users and traders are only procuring material on a requirement basis. Restocking is rare these days. Flat product utilisation by fabricators has slowed down. Long product traders are predicting demand will remain frail and prices are not expected to alter significantly this year.

Indian flat and long product prices have been volatile in January. Both the majors and secondary producers have priced their finished steel products according to the movement in input costs. The early higher quotations were viewed as speculative. Values have since fallen back incrementally towards December levels. We believe that the uncertainty will continue through the first quarter of 2010.

Business conditions are expected to remain difficult in South Africa. Highveld and ArcelorMittal South Africa (AMSA) are now offering near identical quotations. Only discounts and payment terms separate the two steelmakers. The lack of price competition has added weight to the belief that local material is overpriced. A few distributors have procured imported material.

Brazilian steelmakers are now undertaking measures to ensure that production capacity is brought into line with consumption. ArcelorMittal intends to reduce its output at the Juiz de Fora and Cariacica works. Other steelmakers are expected to make similar declarations. The mills are also expected to continue to develop their network of service centres and distributors. In January, local flat products and construction steel quotations were stabilised by the availability of imported material.

The Mexican steel industry is now more positive than at any point in 2009. Upbeat projections suggest domestic demand will rebound this year. Steelmakers have raised their domestic quotations and moderated their discount policies. Production capacities may be raised if trading conditions pick up. Expectation is rife that the mills will increase their flat product offers again in early February. End-users have voiced their concerns that higher production costs will stifle the recovery process and result in inflationary pressures.

CIS steel market players were slow to resume trading after the New Year holidays. The major Russian steelmakers opted to either rollover or lower their reference prices. Their market shares were threatened by cheap imports from the Ukraine and other CIS suppliers. Both domestic and export prices are likely to be raised in February. The steelmakers are also expected to focus on lifting their EAF output on average by 5 million tonnes in 2010/11. The majority of these projects were postponed in 2009.

In the Ukraine, trading conditions are likely to be weighed down by the weak economic fundamentals. Domestic quotations were stable in January whilst export prices were brought into line with international offers. Ukrainian steelmakers plan to increase their production volumes by 3 to 4 percent as against 2009 levels.

Source: MEPS - Developing Markets Steel Review - click here for a free sample copy

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