THE MEPS SEPTEMBER GLOBAL PRICE IS STEADY BUT IS LIKELY TO SLIP SOON

US flat product transaction values continued their sharp decline during August but, more recently, the negative trend has reversed. Producers have announced a series of price hikes in an effort to stabilise the market. Delivery lead times remain short. As the economic recovery stalls, end-users are no busier than before the holidays but are expecting some growth in spring 2011.

Price hikes announced by the Canadian mills have stemmed the declines that took place during July/August and have resulted in some increases. However, demand remains quite dull and some customers expect transaction values to fall again after a short-lived spike. The economy in general, and manufacturing in particular, are still weak. Import offerings are minimal.

Chinese transaction values climbed in August and our September figures are also higher than a month ago. However, the government's energy conservation directives are causing uncertainty. Market players fear steel output reductions could tighten supply in the final trimester. On the other hand, end-user demand is muted. Export sales are declining now because material is becoming too expensive to be attractive to overseas customers.

Japan's steelmakers fear that the yen's rise to a 15 year high against the US dollar is threatening overseas sales of both steel and finished goods. Moreover, demand in many of the country's key export markets in Asia is weakening. Domestic inventories of strip mill products held by the producers, distributors and processors, at end July, increased by 2 percent from the previous month. Meanwhile, quayside stocks of imported flat products rose by around 9 percent in the same time frame.

So far, the South Korean mills have been able to maintain the higher prices established in July on the back of escalating raw material costs. However, demand in the general market is not particularly good so, as input expenditure lessens in the fourth quarter, a reversal in the price trend is a distinct possibility.

End-user purchasing activity is slow in Taiwan as buyers wait to see how period four selling values will develop. At the moment, there is slight upward movement but CSC recently announced that it will cut its domestic list prices for October and November delivery by an average of 6 percent from the September level. The company stated that it needs to remain competitive against imported steel. In contrast, Chung Hung Steel raised its domestic list for September.

Polish transaction numbers suffered further reductions in August. Production cuts, which have been in place throughout the summer, have resulted in some price recovery this month. More business is now being concluded as distributors have begun to restock. The economy is forecast to improve rapidly over the next few months. August was the low point for transaction values in the Czech Republic and Slovakia. Cheap imports from Ukraine, Turkey and Italy had a negative influence on the market. The domestic mills, desperate for orders, were willing to offer concessions. The trend has now reversed, with some small improvements taking place and the producers demanding even more for October. However, end-users are not accepting the higher prices. Consequently, stocks at the service centres are low as they purchase only what they know they can sell.

Strip mill market values in several west European countries slipped during the summer. Producers are expected to try for some small improvements over the next few weeks for fourth quarter delivery. There are low stocks in the supply chain and third country material at the dockside is lacking. However, raw material costs are no longer soaring ahead and may deflect recent mill arguments for price increases.

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

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