INTERNATIONAL STEEL MARKET ROUNDUP - December 2004

This article has been extracted from the November issue of MEPS International Steel Review

FLAT PRODUCTS

US domestic transaction prices continue to slide. The market has slowed down. Customers' inventories are full - service centre stocks at the end of September were the highest in 17 months. The mills have caught up with order backlogs. Import volumes are growing. Local producers need tonnage for December and are discounting accordingly, despite a deep reluctance to do so. However, several steelmakers are planning slightly extended seasonal maintenance shutdowns for the November/December time frame which will take out some capacity and tighten supply. As market conditions are expected to improve in the first quarter 2005, this may be just a temporary price adjustment.

We have noted a significant drop in Canadian mill transaction values this month. Market activity is subdued. A lot of imports are arriving at very attractive prices. Those service centres which rely solely on domestic material are suffering because the price differential can be as much as $C130/240 per tonne.

In China, the strip product price scene has improved slightly. Import supply is limited as prices outside the country are high. There is a robust growth in exports. Domestic demand is still relatively good and availability is problematic for higher grades and thinner gauges.

There is a shortfall between Japanese output and demand. Consequently, local producers are giving priority to domestic customers. Nevertheless, buyers are importing more to cover the deficit. Inventories of imported steel at the docks, as end September, rose by 21 percent, compared with the previous month. In South Korea, demand from the major consumers is predicted to be firm but smaller operations are giving cause for concern. Domestic prices are unchanged. We can see no significant improvement in Taiwanese consumption. Sales to end-users are relatively weak at the moment and stocks are expanding.

EU producers intend to raise basis values on all products for the first quarter. As a result, price levels will be close to our World market figures in US dollar values. This could encourage third country imports but offers from these suppliers still remain limited in most countries. The Polish price trend is positive and expected to remain so, as sales continue to reflect the rapid recovery in the general economy.

Although underlying consumption is still growing in Slovakia and the Czech Republic, market activity has slowed noticeably over the last month. Steel users have become very cautious and are postponing order placement. They feel they cannot pass on the higher prices to their customers. Inventories of strip products are getting larger, particularly at the distributors but mill exports are booming. Suppliers intend to lift period one flat product prices by €30/60 per tonne.

LONG PRODUCTS

New housing starts are slowing down in the US. The non-residential construction market remains in decline. Steel makers are aiming to keep transaction prices steady in the seasonally weak fourth quarter. We have noted some slippage in Canadian domestic transaction values, despite the efforts of the mills to maintain them. Building activity continues to deteriorate.

The Chinese government's attempt to cool the economy has negatively impacted on construction demand, which is traditionally quiet in period four, causing local prices of long products to edge down. Producers are looking to export markets to off-load excess material, thus putting pressure on bar prices elsewhere in South East Asia.

Japanese commercial building demand is strong with increased redevelopment in urban areas and more plants needed for IT applications. In contrast, Taiwanese construction activity is poor. Traders, looking to sell imported material are finding the market very quiet. Recent forecasts suggest that South Korean long products' sales will decrease in 2005 due to the depressed state of the building industry.

Bar prices have come under negative pressure in the EU, despite scrap charges being on the rise in October. We have noted several downward movements. However, as scrap prices remain high, this could prevent steel values from sinking further.

Growth in the Polish construction sector continues to lag behind many other steel consuming segments. The recent upward price trend has halted. The Czech building industry is entering the usually slower Winter phase and, therefore, demand is likely to suffer. Now that more steel is available, we are beginning to see some small price corrections. Whether these deteriorate into a serious slide will depend to a large extent on the severity of the Winter weather.

Source: MEPS - International Steel Review           Click here for MEPS World Steel Prices