MEPS AVERAGE STEEL PRICES CONTINUE TO SLIDE IN ALL REGIONS IN MARCH

Mill outages continue in the US, with operating levels now under 50 percent. There is still negative pressure on transaction prices as sales fail to recover. All the major steel consuming sectors are affected by the financial and economic crisis - from construction through to manufacturing and particularly the auto industry. Moreover, distributors are buying very little as they wait to see some pick up in consumption. Although holes are appearing in inventories, they are not being filled.

In Canada, orders are sparse, causing many producers to close facilities for indefinite periods of time. They continue to axe transaction prices and further erosion is likely as they scramble to fill empty mill rollings. All consuming sectors are experiencing depression, including vehicles, tubing, construction and manufacturing. Customer inventories are at historic low tonnages but are still seen as too high for the dismal level of demand. However, there is some optimism that if the Canadian dollar remains weak, local firms may start to generate more export business. Likewise, the current exchange rate is reducing steel import competition.

Chinese values have been on a downward trend for the majority of the last month. However, having lifted production at the start of the year, local mills have begun to cut output again in response to the re- emergence of excess supply. Additionally, the government's policies aimed at boosting consumption should start to revive demand in the near future. Steel exports continue to contract and overseas sales of manufactured goods are declining because the main destinations, Europe, US and South Korea, have been severely hit by the global downturn. Cheap steel imports, especially from Russia and Ukraine, are putting a strain on the domestic market.

Selling values are softening in Japan. Tokyo Steel decided to cut domestic list prices for all its products by between ¥3000 and ¥5000 per tonne for April contracts, in a weak market climate. Inventories of strip mill products held by local steelmakers and distributors, as end January, moved up slightly compared to December - reaching 4.72 million tonnes. Meanwhile, quayside stocks of imported flat products fell by just 0.8 percent in the same time frame.

In South Korea, Posco has hinted that its production cuts may be extended into this month in line with declining steel demand worldwide and dismal domestic consumption. Taiwanese sales are described as 'satisfactory', although domestic producers Chung Hung and CSC continue to trim prices to help lower the costs of downstream customers. The latter company is bringing forward maintenance at its No 3 blast furnace to mid-April. The work will continue until September, curtailing output by 40 to 45 percent during the period.

Polish demand is still deteriorating. Inventories remain at an undesirable level. Prices have reduced in euro terms but currency fluctuations have pushed zloty values slightly higher this month. We can see no positive progress in the Czech/Slovak markets. In fact, both consumption and prices continue to drop. Because their sales are so slow, distributors have adopted a purchasing policy whereby they buy the very minimum they need. There is no necessity for them to build up stocks because material can be obtained from the mills in small quantities, within two to four weeks.

In Western Europe, the mills are curbing capacity but market players question whether the cuts are sufficient. Distributors are still destocking because sales to end-users are so poor that the whole process is taking much longer than anticipated. Credit issues are exacerbating an already dismal demand situation. The producers have held back from making official announcements for the second quarter. They lowered prices for March output, amidst weak demand, financial uncertainty and severe competition for the small amounts of business that were available.

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

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