GLOBAL STEEL PRICE HIKES LIKELY TO EXTEND INTO THIRD QUARTER

US transaction prices continue to shoot up as the substantial hikes, planned by the mills for June deliveries, are implemented. Further sharp increases have been announced by a number of producers for third quarter business. This is despite a generally weak economic environment. Companies are only purchasing for their immediate requirements, with service centres keeping inventories at minimum levels. The pricing situation is being driven by escalating raw material costs and vastly reduced supply due to a considerable drop in the availability of foreign steel.

In Canada, the domestic mills are busy. There is a lack of imported material, although some offers are now appearing, albeit at the same price as local ones or slightly higher. The auto and manufacturing markets are sluggish. Transaction values continue to rise and July figures are expected to advance by another $C80/110 per tonne as scrap costs keep on growing. Service centre inventories are still declining because of a reluctance to restock at such high prices.

Solid levels of demand and rocketing raw material expenditure, continue to propel steel values upwards in China. Expanding exports have helped to mitigate any supply pressure in the domestic market but customers remain cautious. Japanese mills have announced further upward price adjustments for third trimester deliveries to distributors. Sales to the automotive sector are strong and export business is expanding, causing the producers to reduce shipments to dealers. Inventories of strip mill products held by the mills and service centres went down by 1.8 percent in March compared to the previous month. Stocks of imported steel also dropped by 7.9 percent in the same time frame. South Korea's mini-mills are compensating for huge input cost rises by ramping up steel prices well above those imposed by Posco last month. Maintenance outages have recently curtailed output in Taiwan. CSC is expected to lift domestic sale prices by as much as 20 percent for period three sales.

Polish customers have been warned of a further round of price escalation when third quarter deliveries are finalised. In the Czech/Slovak markets, local demand is booming from a number of end-user segments. Auto, construction and machinery production are performing particularly well. Export business to other EU countries, especially Germany, Italy and Poland is strong. Domestic customers complain that their volume requirements are not being fully met. We have noted some marked price increases this month as customer resistance has finally been broken down. Some buyers had been postponing purchases in the hope that the upward price trend would be halted.

Western European values continue to strengthen. The mills are insisting they must go up again in period three to reflect the rising costs of production. The initiatives are likely to be accepted due to a lack of any competitively priced alternatives. The soaring values are clearly not driven by demand, which is relatively modest. Inventories, generally, are not growing because the cost of finance is too high.

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

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