INTERNATIONAL
STEEL PRICES - LATEST MARKET ROUNDUP FROM MEPS
This
article has been extracted from the May 2005 issue of MEPS International
Steel Review
FLAT PRODUCTS
The US market continues to be
sluggish. Real consumption shows little sign of recovery and service
centres carry on liquidating their stocks which are still too high
for current demand. Transaction prices are still trending downwards.
However, the mills are idling production and bringing forward a
number of maintenance outages in order to bring output into line
with demand. Import penetration is at a relatively low level.
Canadian market transaction values continue to be eroded as the
producers drop prices to try to fill their rolling schedules.
Declines in sales are due mostly to inventory reduction. Service
centre business activity is down, although not alarmingly.
Chinese prices continue on the recent
negative trend. Demand growth is slowing down at a time when
significant new capacity is coming on stream and import deals, made
earlier in the year, are just arriving. In Japan, direct sales to
the carmakers and shipbuilders are expected to maintain a strong
pace throughout the rest of the year. The inflow of offshore tonnage
is starting to make an impact. Contract business is also healthy in
South Korea but distribution activity is lacklustre. Taiwanese flat
product prices are basically unchanged this month. Very few
transactions are being concluded. Values could start to drift
downwards as foreign competition, especially from mainland China,
intensifies.
In Western Europe, overstocking persists
and there is no apparent recovery in end user demand. The market is
also oversupplied, although several producers have committed
themselves to output reductions during the second quarter. However,
we have yet to see any positive effects on prices. The mills will
have to keep their production rates still more firmly in check if
they are to forestall a collapse in prices.
The Polish economy is slowing down.
Manufacturing output in March this year was 4.4 percent below the
2004 figure and construction fell by 3.8 percent. This has clearly
impacted on domestic steel demand. Export business continues to be
hampered by the relative strength of the Zloty against the Euro. In
the Czech and Slovak markets, service centres have surplus material
in stock created by speculative purchasing ahead of perceived price
increases. Consequently, order intake at the mills has slowed
substantially. Instead of implementing the higher prices initially
proposed for period two, producers are lowering their offers in
order to attract the available business.
LONG PRODUCTS
The start of a seasonal pick
up in construction activity, inventory reduction, and a hike in the
May scrap surcharge, have helped the US mills to implement higher
transaction prices for some long products. The Canadian market is
still quite soft with everyone waiting for a Spring upturn that has
not materialised.
In China, long product prices continue on a
downward path. Japanese forecasts for construction demand in fiscal
2005 suggest that levels will be very similar to the previous year.
Non-residential building is expected to increase due to
redevelopment projects around Tokyo, whilst demand for new factories
and stores will keep firm. Construction of high rise urban
condominiums will be little changed. However, general activity will
remain sluggish, particularly in rural areas.
The flow of South Korean government funds
into the construction sector appear to have slowed down, making it
difficult for a recovery in building activity in the first half of
this year. The Taiwanese market for long products is sluggish. As
anticipated, domestic prices this month are heavily affected by
cheap Chinese imports. Despite escalating raw material costs, the
mills have been forced to offer discounts. Market players are
pessimistic about the outlook in the near-term.
The Western European market is quiet. Basis
prices are still decreasing, partly due to declining scrap costs.
However, there is also negative pressure in some countries from non-EU
imports. Polish inventories are still high to the detriment of mill
prices. Bad weather continues to delay construction work in the
Czech and Slovak markets. However, the outlook for the Summer/Autumn
is optimistic with planned start-up for a number of large projects.
Meanwhile, soaring import volumes of competitively priced steel from
Poland, Austria and Germany are eroding local prices.
