MEPS REPORTS MIXED SENTIMENT FOR STEEL PRICES IN THE DEVELOPING NATIONS

Purchasing activity in the Turkish market has been disrupted by weak seasonal demand as well as a religious festival. A shortage of active buyers has deterred long product steelmakers from passing on their higher raw material costs but this strategy may end soon if they continue to rise. In the flat product segment, Erdemir has reduced its basis list values for the first time since early September. The preference for short-term agreements between buyers and sellers persists.

Grey clouds have been encircling the UAE steel segment this month. The contrasting fortunes of Abu Dhabi and Dubai have been brought to prominence in recent weeks. Debt concerns have eroded confidence in the latter and the economy has yet to recover from the onset of the global credit crunch. Demand is expected to fall further.

In December, the Indian majors reduced most of their domestic reference prices. This is the second successive month of downward adjustments. The objective remains to restrict imported material. In January this strategy may end. The lower prices have stimulated purchasing activity. Some sections of the industry are already hinting of price rises in the first quarter of 2010. Others are unconvinced and believe that finished product values have not bottomed out yet.

Business conditions have not improved in South Africa. Highveld has once again followed the pricing strategy adopted by ArcelorMittal South Africa (AMSA). In effect, local offers have been rolled over. The former executed a “special” sale in late November to fill up its capacity. For January, the mood in the market is cautiously optimistic.

Brazilian steelmakers remain bullish over the strength of the recovery. The pricing policies of flat product steelmakers continue to draw criticism. Domestic prices edged higher in December. Distributors have responded with a rise of their own. Market participants also believe that the mills will have to resume exporting if current prices are to be maintained. Production capacity continues to exceed utilisation. Local producer, Gerdau, has tried to quell market rumours of imminent construction steel price adjustments. The steelmaker intends to keep its domestic quotations and discounts unchanged until the end of the year.

Arduous trading conditions continue to hinder the Mexican steel industry. Low demand has placed further downward pressure on domestic quotations. Local steelmakers have raised the effective prices of some products. This was achieved by withdrawing their generous discounts. The move has infuriated fabricators. For January, market sentiment is mixed over the direction prices will take. Producers are pushing for a rise of up to 5 percent whereas end-users are requesting a “real” reduction.

CIS steel markets are now weak from seasonally poor demand. The major steelmakers have opted to reduce their references prices to protect their market shares. Traders have employed a similar strategy. The Russian steel industry does not believe the current low price levels are sustainable. Local producers are still a long way from returning to full scale production and profitability. Layoffs, a shortened working week and bankruptcy procedures remain burning issues. The Russian government has approved a decree authorising a 5 percent import duty on some cold-rolled products. The duty will be enforced from January 2010.

In the Ukraine, trading conditions have started to stabilise. Domestic quotations for most rolled products supplied by local mills have now fallen below export offers. This oddity was corrected by a memorandum of understanding between the government and steelmakers. Producers intend to raise their finished rolled products output by 4.5 percent to 2.77 million tonne in January 2010.

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

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