STEEL PRICES DECLINE IN ALL REGIONS OF THE WORLD DURING OCTOBER

In the US, flat products transaction prices fell in October despite the fact that the domestic mills had proposed further rises for the fourth quarter, on top of those noted last month. Delivery lead times are relatively short. Producers do not have full order books and have had to offer discounts to try to stimulate demand. Distributors report that their business is just about satisfactory but likely to slow as the year-end approaches. Consequently, they are cautious regarding their forward purchasing levels.

Several Canadian mills are currently operating below capacity. Customers were reluctant to agree the price hikes announced last month to recover more costly raw material inputs. The increases were not fully implemented, leaving October transaction figures lower than in September. Further downward pressure is developing because buyers expect special year-end deals, as was the case in 2010. This could prove difficult for the steelmakers with their current cost structures. However, now that domestic prices are cheaper, overseas material looks less attractive and so import activity has reduced.

West European buyers are reluctant to place orders on the mills as concern over the current financial crisis is undermining business confidence. Because demand is so mediocre, the output cuts that the producers have implemented so far have not had any positive effect on basis values. However, more production curbs are planned by several steelmakers.

There are worries about Chinese demand. Inflationary pressure has prompted the government to force the banks to cut back on the supply of credit, slowing the growth of steel consumption as manufacturing output is weakening. The upward market price trend has reversed. Despite this, Baosteel has elected to keep most of its official ex-works figures for November bookings of flat products unchanged, in the hope that this will boost confidence. In contrast, two other large mills, Wugang and Anshan, have announced decreases. Order intake from overseas clients is predicted to decline for the remainder of 2011.

After softening steadily for most of this year, Japanese steel export volumes dropped sharply in September. Weak demand and growing capacity in the Asian region are to blame. However, imports are on the rise due to the strong yen. Quayside inventories of imported flat products, as at the end of September, failed to reduce from the high levels of August and there are fears that they could climb even higher. Although Tokyo Steel lifted its October domestic list prices to reflect higher scrap costs, it has recently reversed the hike for November shipments.

The South Korean manufacturing sector remains depressed. However, domestic forecasts predict a small increase in steel demand in 2012, with special emphasis on overseas markets. Meanwhile, inventory adjustment is slow. Stocks of flat rolled items climbed again in August.

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

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