Latest Supply/Demand Roundup of Hot Rolled Coil From MEPS

European mills are experiencing low levels of order entry and, consequently, some production cuts have been announced. Nevertheless, this year's outturn of hot rolled coil could be up 3.8 percent on the 2010 figure.

MEPS’ prediction for Japanese output in 2011 remains at below the 17 million tonne mark. This equates to a fall of 3.2 percent, year-on-year. The ongoing strength of the yen has adversely affected export sales which are expected to decline this year, compared with 2010. South Korean mills are ramping up output from newly commissioned facilities and the 2011 outturn should surge by well over one third. Hot rolled coil exports are forecast to grow as local demand could remain soft for the rest of the year.

Despite maintenance work by Chinese steelmakers in August and September, output in the third trimester is estimated to be over 30 million tonnes. MEPS believes the outturn in the full year will be fairly flat compared with 2010 as hot rolled material is being diverted to produce downstream, cold rolled and coated products. Export sales continue to contract because of a weakness in overseas demand, the appreciation of the local currency and competitive third country offers. Price hike announcements have stimulated sales in Taiwan but underlying consumption is still not strong. However, hot rolled coil production could expand by well over 10 percent this year due to new capacity being brought on-stream.

We project Brazilian production at 6.35 million tonnes in 2011. Despite lower than anticipated sales in period two, US mills ramped up output in the third quarter. MEPS’ forecast for shipments in 2011, however, remains at 31.2 million tonnes. With material so plentiful and relatively short lead times, producers may be forced to cut supply in the final trimester. Canadian customers continue to purchase carefully due to the demand uncertainty. Mill order books are weaker than earlier in the year. MEPS’ projection for the supply of hot rolled coil in 2011 represents a 5.6 percent increase on 2010.

Sources - MEPS World Steel Outlook Q3 2011