THE MEPS GLOBAL STEEL PRICE JUMPS 3 PERCENT IN JANUARY

A flurry of mill price hike announcements in December has translated into substantially higher transaction values for business recently settled in the US. The primary driver for the increases has been escalating input costs, since there is no pick up in real demand from any of the main consuming sectors and service centres continues to keep inventories at minimum levels. There is a scarcity of attractive import opportunities. The weak currency should help to keep overseas material at bay for some time to come. In the last few days, producers have tabled more price initiatives for February deliveries due to the impact of scrap expenditure.

Canadian customers appear to be slightly more optimistic about future business levels, although they are expecting only gradual improvement as the year progresses. They are keeping inventories down with only a small amount of rebuilding from the minimum volumes seen in mid 2009. Mill activity, which is slowly reviving, is still significantly below the norm. As their material costs are rising, producers have been ramping up transaction values and warn that further increases are on the way. Some buyers are ordering ahead of these perceived hikes. Imports are at a low enough volume not to be considered a major force in the market.

Local prices continued to rally in China in early January until the government's announcement that bank lending requirements would be tightened. Since then, the upward tendency has started to reverse. Nevertheless, our January figures are still above those published in December. There is concern that much of the increase in selling values witnessed recently was caused by surging raw material costs and may not reflect demand.

Japanese steelmakers are benefiting from a significant recovery in consumption by carmakers and home appliance manufacturers as they continue to rely heavily on overseas sales. Domestic inventories remain stubbornly high. However, quayside stocks of imported flat products, as end November, fell by 3.5 percent compared to October, mainly due to a slowdown in arrivals from foreign suppliers.

The South Korean economy is moving out of recession, enabling the steel producers to enjoy the growing demand from key consumers such as auto and appliance makers. However, not all sectors are booming. Inventories of flat products held by South Korean distributors rose by just over 1 percent from end November to end December.

Taiwan's CSC has issued a statement covering list prices for March business. The company will lift domestic values by an average of 5 percent, on soaring raw material costs and rapidly expanding demand. Market prices are already strengthening.

Although overall demand is muted, activity in the Polish market is slightly improved. This has eased the downward pressure on prices reported last month. Market players in the Czech/Slovak countries report that sales are stable, albeit at a low point. Service centres are keeping stocks so lean that some items are in shortage. Producers have started to try to boost transaction values but it will be some time before the outcome of this initiative is clear. No significant improvement in steel consumption is anticipated until 2011.

The West European market remained quiet two weeks into the New Year. Many companies took extended holidays because of the poor economic climate and the severe weather hitting several countries has also served to dampen activity. Domestic producers are looking to implement strip mill price rises during the first and second quarters, mainly on the back of anticipated higher raw material costs.

Source: MEPS - International Steel Review - click here for a free sample copy.

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