SEASONAL DEMAND AND PRICE VOLATILITY HAVE TAKEN HOLD IN THE DEVELOPING MARKETS

In the Russian Federation, domestic metallurgical plants have continued to operate at reduced capacity. Shipments to the construction and heavy manufacturing sectors have remained sluggish. However, recent sales volumes to the automotive and gas industries have been encouraging. Earlier this year, light vehicle manufacturers and gas pipe fabricators received financial support from the government. Trader procurement rates of flat products have remained stronger than long products, as the construction season comes to an end. Faced with the prospect of losses in September, distributors have begun to adopt pricing positions to lower inventory levels.

Ukraine’s anti-monopoly committee has approved the proposed merger between Metinvest and Ilyich Iron and Steel Works of Mariupol. The EU’s competition authority is now reviewing the tie up. Further consolidation is now forecast to take place within the industry. Domestic steelmakers have faced challenging trading conditions in 2010. Working capital issues have forced several steelworks to mark down their August production capacities. Ilyich has reduced its domestic flat product quotes by 8/11 percent. Zaporizhstal has opted to maintain its transaction values at July’s levels. The differential between domestic and export figures has narrowed but it remains a controversial topic for end-users.

Difficult trading conditions have persisted in Turkey’s long products segment. Initially, domestic quotations edged higher. The upward movement was facilitated by an unexpected spike in the purchasing cost of ferrous scrap and billet. Flat products steelmakers have also endured a challenging sales environment. The heavy plate segment remains the worst performing of the flat products. Erdemir’s plate mill has only been operating at a fraction of its capacity.

The Indian steel industry is now preparing itself for the end of the monsoon season. Inventories are currently at high levels but this material is expected to be easily absorbed. Escalating production costs have forced re-rollers to issue higher selling figures. For the time being, the majors have opted to maintain their selling prices at July levels. The Ministry of Steel has been asked to re-examine the need for measures to control the inflow of third country material. Importers are understood to be opposed to any form of government interference. The position of steelmakers with captive iron ore reserves is also being reviewed. A proposal is being considered to separate the steel making operations from the mining business.

Trading activity in the United Arab Emirates has slowed. Construction activity in the Gulf State has ground to a halt and will not resume until mid-September. The downturn has yet to be reflected in steel product values. Inventory levels are low. Traders and service centres are now looking forward to the end of Eid. Orders for imported material are virtually zero.

The South African economy is now experiencing the first signs of the post-World Cup downturn. Shipments of construction steel have slumped but transaction values have edged higher due to rising raw material costs. ArcelorMittal South Africa (AMSA) is now operating with an “all inclusive price”. The controversial Sishen surcharge has been absorbed into AMSA’s selling price. However, AMSA has sparked controversy by announcing plans to acquire Imperial Crown Trading (ICT), the company allocated the disputed 21.4 percent mining rights in the Sishen Mine (SIOC).

Brazilian producers are expecting domestic values to rise again, backed by stronger shipments to the country’s construction and infrastructure sectors. Any discussion about price adjustments is bound to alarm the Lula administration. Earlier this year, officials threatened to cut taxes on some imported products. Last month, CSN and Usiminas escaped any punishment when they issued a 10 percent price increase for some steel products.

Market sentiment in Mexico has remained gloomy. In the third quarter, shipments to the construction and heavy manufacturing sectors have been softer than anticipated. Inventories are above ideal levels, forcing local steelmakers and distributors to review their pricing positions. Quotations are lower for a few flat products. Several long product mills have continued to operate below capacity.

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

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