WORLD STEEL PRICES FOR FLAT PRODUCTS FORECAST TO MOVE HIGHER

US transaction values appear to have bottomed out in September. However, although we have posted some small transaction price increases this month, several smaller mills are still discounting in some instances to keep production levels up. Inventories at service centres and O.E.M's are now more in line with demand. Distributors are reporting slow activity and those buyers who can afford to wait before placing orders are doing so. The weak US dollar continues to hold imports at bay. Some of the larger steelmakers are actively pursuing export opportunities.

Transaction prices in Canada have been undermined by low sales, oversupply and a strong currency. Local mills are experiencing weak demand from end users and distributors, whilst at the same time trying to maintain good or growing plant utilisation rates to perform well for their new owners. Third country offshore offers are scarce but US imports are still a force in the market as they become increasingly competitive because of the devaluation of the US dollar. Inventories are coming down but the decline is slow.

Chinese domestic flat product prices have undergone some small downward adjustments after peaking in September. Consumers are cautious because the mills continue to expand capacity. In Japan, demand from major end-user sectors remains firm. However, inventories of strip mill products continue to climb. Total domestic stocks of coil held by steelmakers and service centres, as end August, grew by 1.8 percent compared to July. Quayside inventories of imported flat products jumped by 7.5 percent in the same time frame but traders believe the increase was just a blip rather than the start of a long term trend. Posco and CSC have both warned Japanese customers that they are about to cut export volumes.

We can detect signs of strengthening demand in South Korea where prices are stable. Consumption in Taiwan continues to be brisk and prices have spiralled upwards since late September. These higher values could start to undermine sales. However, we expect that mills will continue to try to implement increases inline with the growing costs of production.

Due to competitive imports as well as continuing high inventories, Polish producers have dropped their strip mill product prices by the equivalent of €10 per tonne for fourth quarter deliveries. Distributors are trying to reduce stocks. The strong Zloty and booming domestic demand is drawing in imports of finished goods and damaging exports. Czech/Slovak steel consumption is good.  However, prices are so high that some small discounts have been applied for sales to large, regular buyers. Imports pose no real threat for the moment. Delivery lead times from domestic mills are acceptable. Stocks at the service centres are normal.

In Western Europe, end-user demand for strip mill products remains good but distributors, who continue to carry surplus inventories, are buying very little. This lack of activity, together with what appears to be a determination on the part of European producers to drive out imports at all costs, has created negative price pressure. However, the mills are intimating that they will seek advances at the start of 2008.

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

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