THE MEPS GLOBAL CARBON STEEL PRICE
DROPS 3 PERCENT IN NOVEMBER
Raw steel output continues
to climb steadily in the US. Mill utilisation rates were up to almost 65 percent
in the first week of November. However, the recent relighting of blast furnaces
has not coincided with a similar upturn in consumption. Oversupply could become
a problem in the first quarter 2010. Service centres report that their sales
have slowed markedly due to a lack of end-user demand, a situation they expect
to continue for the remainder of this year. Consequently, their restocking phase
has come to an abrupt end. As we anticipated in October, the steelmakers have
started to offer discounts in order to solicit business, despite a lack of any
real import competition.
Mill order intake is also softening in Canada, in line with the usual seasonal
slowdown. Customers' activity levels are still quite low and many expect to see
relatively weak business conditions ahead. Buyers are quite cautious regarding
their expectations for the start of 2010. Our transaction numbers are below
those of October. Producers report that pricing is very competitive and they are
anticipating the need to offer further concessions in order to fill their
December rolling schedules. There have been some increases in import permit
applications believed to be due to earlier domestic supply disruptions.
Chinese market sentiment is healthy. Local values have rallied over the last
four weeks, driven by speculators, rising input costs and government promises to
continue to support economic expansion. Several mills have recently lifted their
official ex-works prices as a sign of confidence in the changed market
conditions. Nevertheless, the spectre of oversupply still dominates the steel
sector because the producers have failed to curb production.
The Japanese economy remains relatively weak with few signs of any significant
recovery in flat product demand, other than from auto and overseas steel sales.
The mills are cautious regarding 2010. They believe that the current revival in
their own country and elsewhere in Asia is largely due to governments' stimulus
measures. The question is, "will the trend continue when these initiatives are
no longer in force?". Inventories held by local mills and distributors, as end
September, decreased by 1.5 percent compared to August. Quayside stocks of
imported flat products dropped by a similar amount in the same time frame, to
reach the lowest volume ever recorded, as buyers spurned foreign material.
Better demand from the vehicle and home appliance manufacturers continues to
propel a small improvement in the South Korean flat products sector. Stocks, at
the end of September, had reached a record low for the year. Cheap imports,
particularly from China, are damaging market values in Taiwan as domestic
suppliers strive to maintain market share.
There are few positive signals in Poland. The supply constraints reported in
October have eased. Although prices are unchanged at present, we can detect
downward pressure due to a deficit of any significant activity. As expected, the
enhanced figures realised in the Czech/Slovak market last month were not
sustainable. Final consumption remains low. Service centres are selling off
stock very cheaply, thus incurring poor profit margins. Buyers report
competitive offers from Russian mills.
The West European producers are currently facing low order intake as the flurry
of activity in early September has tailed off now that distributors have
restocked to appropriate levels. In many countries, prices have been lowered a
little to encourage purchasing. Negotiations will start soon for first quarter
2010 business but no official announcements have been made yet, regarding the
mills' proposals. The threat of excess supply is still causing unease as the
steelmakers expand production while demand from the key consuming sectors stays
weak. As far as imports are concerned, more expensive Chinese offers are
dampening interest from potential customers.
Source: MEPS - International
Steel Review - click
here for a free sample copy.
the latest copy of International Steel Review here
up for free MEPS steel news alerts