INTERNATIONAL STEEL PRICES - LATEST MARKET ROUNDUP FROM MEPS

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

FLAT PRODUCTS

US buyers have accepted further transaction price increases. The driving force is a lack of supply. All domestic mills are operating an allocation policy for customers, with no extra tonnage to be had. Several are working below normal rates due to a variety of production/labour issues. Availability is even tighter because very few imports are being offered.

Canadian market conditions are very strong. Transaction values have moved up and the trend is likely to continue. Supply is constrained, with Stelco telling some buyers they will have no material until August. This is partly due to trying to build up stocks to protect major contract customers ahead of an anticipated strike on July 31. Inventories are low at most service centres and distributors' profit margins have improved. Importers have stepped up their offers for August/September arrivals by $C100 per tonne.

Purchasing activity in China is slow following the Labour Day holidays and inventory adjustment is protracted. Market sentiment seems less positive than a month ago, despite falling stocks of foreign steel at the ports. In Japan, domestic inventories of strip products continue to subside. Stocks at the end of March were down by 4.8 percent, compared to the previous month but the level still remains above the 4 million tonne which is considered appropriate. The slowdown in export sales has been further exacerbated by recent strengthening of the Yen against the US dollar. Import volumes are still climbing.

Similarly, the strong KRW continues to pose problems for the South Korean mills, making the market more attractive to exporters in the region. Overseas sales are difficult for the same reason.  However, the overburdened stock situation is slowly being brought under control and prices should benefit in the longer term. In Taiwan, the steel market in May continues to prosper with an ever upward price tendency. However, the threat from cheaper Chinese imports remains. Moreover, the Monsoon season, which often adversely affects demand, is rapidly approaching.

Continuing price rises and difficulties in sourcing material remain the outstanding characteristics of the EU market. All the mills have announced significant price rises for the third quarter, which no doubt will be secured. However, third country import offers are beginning to look attractive when compared to the proposed European period three figures. Market players are concerned that these could prove disruptive in the latter part of the year or in early 2007.

Polish domestic producers have achieved further price advances in the strip mill category and figures look poised to go up further when third quarter proposals are announced. However, although ex-mill numbers are increasing, resale values are not following the trend to the same extent. Distributors' inventories are now fairly high but real consumption is quite flat. We can report very little change in Czech/Slovak pricing this month. Producers are careful not to push values up too much so as to avoid attracting Polish imports in the North or German ones in the West. Customers are still hesitating about rebuilding stocks. There are no reported shortages from the mills.

LONG PRODUCTS

US transaction values were quite flat in May. Nevertheless, ongoing recovery in commercial and industrial building activity is providing firm demand for a number of long products. Delivery lead times have moved out in Canada and mill transaction prices are stable or rising. However, service centre sales are still slow and profit margins have not improved.

Since the Labour Day holidays, Chinese construction steel prices have rebounded or remained steady, depending on product. A seasonal upturn in consumption by the building sector is helping to sustain the price recovery. Although Japanese demand has shown a modest improvement, the construction industry remains depressed as a result of the recent building sector scandal.

South Korean activity is showing signs of a recovery in the peak Spring construction season. Offer prices of long products have been raised in Taiwan because of the surge in international scrap costs. However, it is difficult for downstream customers to cope with these rapid increases, causing a temporary reduction in transaction volumes. How long the market can continue to flourish remains uncertain.

The price trend in Western Europe is positive, although the top may have been reached for some products, unless scrap begins to move again. The situation is similar in Eastern Europe where the construction season is just beginning after the long Winter months. Producers appear to be absorbing a proportion of their escalating input costs for the time being.

Source: International Steel Review