INTERNATIONAL
STEEL PRICES - LATEST MARKET ROUNDUP FROM MEPS
This
article has been extracted from the September 2005 issue of MEPS International
Steel Review
FLAT PRODUCTS
As expected, poor consumer
demand and overhigh inventories led to further transaction price
slippage during August, in the US. However, the bottom appears to
have been reached and values have picked up in recent weeks.
Although rising scrap costs were the initial driver, inventory
levels have now come down and import penetration is currently quite
low. Further rises are anticipated in October.
In Canada, the inventory drawdown is
progressing well. Stockists' shipments are beginning to improve,
although not quite to the levels of last year. Some mills are now
quoting January delivery because of production problems. Not
surprisingly, customers have conceded quite substantial transaction
price hikes on all flat products.
Chinese demand is strong from the auto,
home appliance, power and machinery sectors. However, constantly
increasing domestic steel capacity is undermining market prices.
Japan's major mills will reduce output during the October/December
period in an effort to support prices and curb oversupply in the
market. Steel service centre inventories, which are in excess mainly
due to imported material, will take some time to adjust. However,
for the moment, values have stopped their downward trend.
In South Korea, demand from the carmakers,
domestic appliance manufacturers and the building sector has been
slowing recently. Posco is to cut output substantially in a bid to
rectify the stock overhang which is currently causing negative
pressure in the market place. Soaring import volumes are to blame
for much of the excess. Taiwan's CSC plans to curb production of
flat products by up to 70,000 tonnes in the fourth quarter. The
company will also lower prices - the first official decreases in
around three years. Price offers from China will now be close to
local Taiwanese figures. Thus the threat from Chinese imports should
diminish. Reconstruction has begun after the devastation of several
typhoons. Therefore, the outlook for steel demand should improve.
Since our early July research, we have
noted a number of downward price corrections in Western Europe as
market conditions continued to weaken throughout the Summer.
Producers are naturally anxious to recoup their higher raw material
costs. Several announcements have been made about the prospects of
price hikes for the fourth quarter.
Poland's economic performance continues to
disappoint with falling local consumption of finished goods and
exports hit by the strong Zloty. This poor scenario has hit sales of
steel products. Moreover, customers are importing heavily,
particularly from Russia and Ukraine.
Czech/Slovak strip prices dropped sharply
in August. A slight recovery has taken place since then but figures
are still well below those published in our July issue. It is too
early to say whether the bottom has been reached. However, stock
levels are normal which bodes well for future market improvement.
Real consumption continues to grow.
LONG PRODUCTS
We have noted a number of partly scrap
driven transaction price rises in the US. Construction sector demand
has been steady and local producers are not being distracted by any
severe import competition at present. Future building activity is
likely to be boosted by planned federal spending increases on
infrastructure. The non-residential construction market, which has
been weak for sometime, also looks to be improving. The Canadian
building industry has now used up most of the excess stock that has
troubled the market for most of this year.
In China, long product prices have been
oscillating up and down during the Summer but are currently above
those quoted in July. Inventories have returned to more normal
levels and there is far less new capacity coming on stream than
earlier in the year. Japanese prices have shown some positive
developments over the last two months. The Autumn is traditionally a
time of peak demand for construction related steel products.
The South Korean building industry remains
depressed but an upturn is predicted for the latter part of 2005.
Strong international scrap prices have allowed Taiwanese mills to
lift most long product prices this month, despite competition from
Chinese imports. Further rises are expected.
The sharp rebound of scrap costs has led to
some significant price recovery in Western Europe. Construction
activity has picked up. Buyers are now purchasing in advance of
their needs because they anticipate further price hikes. East
European values dipped in late July but we have since seen some
positive developments, which are expected to continue as scrap
charges are on the rise.
