HIKE FOR US STEEL PRICES
US transaction prices are going through the
roof with gains over the last four weeks as high as $US145 per tonne
for some products and more substantial hikes planned by the mills
for June deliveries. Domestic values have now caught up with average
world prices. Although real demand is no more than satisfactory
as the economy weakens, supply is being allocated by the local mills.
The availability of imports is virtually nil, due to the weak US
dollar, high ocean freight rates and soaring prices in other regions.
OEM's complain that expected delivery times are not being met. Inventories
at the service centres are described as "low to medium".
They are unlikely to be rebuilt in the short term as buyers are
unwilling to speculate when steel is so expensive.
In Canada, domestic order intake is strong.
Producers need to offset the large increases in raw materials, such
as iron ore and scrap. Consequently transaction values continue
to advance, despite alarm amongst customers. Current imports and
permits for the future remain low. Whilst local demand is reasonable
but not overly strong, reduced foreign supply has helped keep the
market in balance. Distributors' inventories dropped 10 percent
in February to the lowest volume in more than a year. Stocks are
depleted enough to require the service centres to keep purchasing,
although they hesitate to do so with prices so high. The mills have
tabled more increases for June.
International values are rising more swiftly
than those in China at present, spurring on producers to look again
at export opportunities. However, local demand remains solid. Output
cuts at steel mills around Beijing, ahead of this Summer's Olympic
Games, are expected to further strengthen values. In Japan, steelmakers
have reduced shipments to the distribution sector in order to service
the requirements of contract customers at home and abroad. Service
centres are looking for alternative sources overseas. Further, upward
price adjustments are expected in the third trimester. Inventories
of strip mill products held by the mills and distributors went down
by 2.3 percent in February compared to the previous month. Imports
declined by 14.4 percent in the same time frame. Export business
continues to expand. In South Korea, as expected, Posco has compensated
for huge raw material cost rises by ramping up steel prices by an
average of over 20 percent. Taiwan's Chung Hung Steel announced
sharp increases on all flat products for April business. CSC is
already warning domestic customers of further price hikes to come
in period three.
The upward price trend continues in the three
East European countries under review. Monthly pricing is now commonplace
amongst domestic mills. There is concern that the strength of local
currencies against the Euro will have a negative impact on exports
of both steel and manufactured goods. In Western Europe, despite
relatively muted consumption, steel prices continue to escalate,
sustained by supply-side restrictions. There are virtually no workable
offers from third country sources. Moreover, many market players
believe that the EU mills are maintaining low output in order to
drive values up - using higher input costs as justification. The
producers are talking of another round of price advances for period
Source: MEPS - International
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