HOT ROLLED COIL STEEL PRICES IN DECLINE AROUND THE WORLD

Some steelmaking facilities in the US are closed due to poor market conditions. Capacity utilisation in the remainder has fallen to around 67 per cent. End-user demand has not improved as the economic recovery has stalled. However, customers have allowed their inventories to sink to very low levels and so need to order some material. Despite mill announcements of increases, flat product transaction values have started to decline once more, following September's brief upturn. The fourth quarter is historically weak and producers are aware that prices could contract even more. Foreign offers are lacking.

Canadian consumption remains quite depressed. Buyers, anticipating a downward price trend to the year end, are holding off from purchasing. The steelmakers, facing a cost squeeze, may need to reduce output in order to establish a better supply/demand balance. Customers' inventories are adequate for current usage and they intend to keep them to a minimum, in the face of potential stock devaluation from tumbling market prices. Offshore selling values did fall over the past couple of months but offers are starting to rise again.

The decision to lift interest rates for the first time in nearly two years has damaged sentiment in the Chinese steel market, at least in the short-term. Leading steelmakers have been cautious in their approach to November pricing - keeping their official ex-works figures for many products unchanged. Overall domestic demand is expected to soften in the final trimester for seasonal reasons. The outlook for export sales is not encouraging.

Demand in South Korea's general market is not particularly good. As input expenditure lessens during the final quarter, a reversal in the price trend could become a distinct possibility. So far, with the exception of hot rolled coil, the domestic mills have managed to maintain the higher figures established back in July when raw material costs were soaring.

Taiwan's CSC has left many products basically unchanged during recent announcements of its December list, in order to help downstream users to be competitive. The company has also cited weaker global prices and the appreciation of the local currency against the US dollar. Demand has not improved as much as was expected.

Although Polish steel consumption is slowly reviving, with the economy forecast to recover rapidly over the next few months, distributors are keeping stocks at a low level. Transaction numbers for strip mill products have moved up since our last report but the mills may not be able to maintain the advances during the winter.

A strengthening Czech currency has created problems for exporters of both steel and manufactured goods. Overall demand for flat products is relatively unchanged but selling figures are declining, despite price hike announcements by the mills. Service centres are suffering because resale values are so low. They continue to keep inventories down and would like to reduce them further ahead of the weak winter season. There is very little import competition.

Negative pressure persists in the West European market. Having recently brought more capacity back on line, domestic mills are now suffering from a lack of orders, since end-user demand remains weak in many sectors. Under these circumstances, distributors refuse to rebuild stocks. This has led to further discounting this month. The weakening US dollar has also made third country imports of commodity grade material more competitive, although the longer delivery lead times are still problematic in today's rapidly changing climate.

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

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