VOLATILE REGIONAL STEEL PRICES BUT MEPS GLOBAL AVERAGE FIGURE STABLE
The MEPS Global All Products Composite Steel Price was
US$713 per tonne in April – unchanged from the previous month. US strip mill
product prices increased. In contrast, transaction values declined in the EU.
Selling figures in Asia were relatively stable.
Following the successful implementation of last month’s US$30/40 per short ton
rise, US flat product producers have announced a fresh round of increases of
between US$25 and US$40 per short ton. Delivery lead times have extended
considerably due to supply side disruptions. The lack of domestic availability
is likely to keep import demand high. Severe winter conditions played a huge
part in causing delivery delays and a general decline in sales during the first
quarter. With spring approaching, the view is that market conditions will
continue to recover.
There is still some resistance to producers’ efforts to advance prices in Canada
but transaction values are starting to move up. The weak domestic currency is
still deterring imports from the US. Supply is tight. Inventories continue to be
low throughout the supply chain. Customers are cautiously optimistic regarding a
slight uptick in consumption.
Expanding output continues to weigh heavily on the Chinese market, particularly
as the pace of manufacturing growth has slowed. However, both mills’ and
traders’ inventories continue to contract and a number of steelmakers will carry
out maintenance this month, thus cutting output. Export volumes have surged.
Producers are focussing on overseas sales but their profitability is still being
squeezed due to an overall imbalance in domestic supply and demand.
Recently escalating domestic consumption in Japan is expected to decline over
the next few months, following an April increase in sales tax, which is likely
to deter consumer spending. For the moment, steelmakers are having to cope with
higher outlay on scrap, energy and transport, with little likelihood of
recouping these additional costs from customers. Moreover, imports are becoming
cheaper as the firm demand in Japan attracts overseas traders. Volumes have
climbed rapidly in recent months.
MEPS has noted no improvements in the South Korean situation. Selling values are
flat and producers’ profits have tumbled. Demand is lacklustre amidst surplus
supply which is the result of domestic overcapacity and an influx of cheap
Chinese material. Output of flat products is forecast to shoot up even more
during 2014. A lack of sales opportunities in an extremely competitive export
environment is contributing to the overall problem.
In Taiwan, major steelmaker, CSC, has said it will keep official June list
prices unchanged, following a small rise for the April/May period. This month,
sales continue to be subdued as the traditional second quarter peak season
demand from industrial sources appears slow to materialise. Selling values in
the marketplace have eased downwards, partly as a result of ongoing import
pressure from the Chinese mainland.
An imbalance in supply and demand has continued to be reflected in West European
flat product prices. Despite optimistic macroeconomic indicators in several
countries, customers are still hesitant to place orders. Last month’s sudden dip
in raw material costs caused a negative reaction in the market. Now that the
trend has reversed somewhat, we may see prices bottom out. Indeed, several
buyers have commented that the mills have recently become quite resistant to
granting further discounts.
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