INTERNATIONAL STEEL PRICES - LATEST MARKET ROUNDUP FROM MEPS

This article has been extracted from the April 2006 issue of MEPS International Steel Review

FLAT PRODUCTS

There is a fair amount of concern in the US amongst service centres, OEM's and end-users that supply is becoming very tight. The situation appears to be driven by supply-side controls rather than any significant uptick in real demand. Nevertheless, distributors are busy and buyers have accepted a transaction price increase of $US20 per tonne. Producers are talking of further hikes for June. So far, rising import volumes have failed to adversely impact the market.

As expected, transaction values are moving up in Canada, where market conditions are good. Further increases are anticipated. Supply is extremely limited because of mill production issues and this scenario is likely to continue into period three. Resale margins are holding steady.

Purchasing activity in China has slowed in recent weeks, and inventory adjustment is protracted. However, market sentiment remains positive. Stocks of foreign steel at the ports have fallen significantly. The strip market is getting better in Japan due to an upturn in China and export price increases by the South Korean mills. In addition, inventories have finally started to subside. Stocks at the end of February were down by 1.9 percent, compared to the previous month. Meanwhile, export volumes continue on a steady downward trend.

South Korea's overburdened stock situation is coming under control. According to recent data, flat product inventories held by domestic producers at end March fell by 14 percent compared with the previous month. However, the strength of the WON continues to pose problems for local mills, making the market more attractive to exporters in the region and South Korean steel more expensive for overseas buyers.

The uptrend in Taiwan has continued into April. Sales volumes generally have improved. CSC's proposed second quarter price hikes have been successfully executed. However, there is a degree of concern that distributors are accumulating excessive stocks, as they try to purchase ahead of perceived price rises. The effect on steel demand of the approaching Monsoon season should also be taken into consideration.

The West European mills have secured their proposed rises for period two and most suppliers now claim to be fully booked for the quarter. The intention is to lift values again for third trimester deliveries amidst tight supply from home and abroad. However, in a market characterised by shortages and lengthening lead times, we can detect no substantial upturn in real consumption. Polish market demand is steady. The domestic producers have achieved further price advances in the strip mill category. In the Czech/Slovak market, the upward price movements have been very modest, so far, although consumption is strong and inventories on the low side. Import competition is not disruptive.

LONG PRODUCTS

Ongoing recovery in US commercial and industrial building activity has resulted in firm demand for a number of long products. Transaction values are moving up. Canadian prices are firm or rising but service centre business is still described as "spotty" for some product lines. Mill delivery lead times are extending. Inventories are coming down slowly.

Chinese prices of construction steel products have changed very little over the last month. However, we expect to see some price expansion as domestic stocks steadily decline, raw material costs increase and demand improves along with the weather. Japanese figures are steady, despite ongoing poor demand. The South Korean building segment is reported to be showing some signs of recovery as we move into the peak Spring construction season. The upward price tendency in the Taiwanese long products sector continues. However, the upcoming Monsoon season could have a detrimental impact on the market in the near future.

Scrap prices are pushing up steel values in Western Europe. With the traditionally busy months of the Summer still ahead, figures look set to remain firm or even trend upwards. Weather related slowdowns in the construction markets of Eastern Europe are now coming to an end and steel prices are benefiting. Polish mills are enjoying good export business, even thought the local currency is strong. There are many new projects in the pipeline in the Czech/Slovak markets.

Source: International Steel Review