GLOBAL STEEL PRICE RECOVERY IS NOW UNDER
The MEPS world all products composite steel price soared
by 13.8 percent, in May - the largest month-on-month increase, in percentage
terms, for more than a decade.
In May, global steel values advanced for the fifth month in a row as European
and North American selling figures continued to surge, by 19.3 percent and 13
percent, respectively, compared with those in April.
Chinese mill offers, both at home and overseas, continued their upward
trajectory in late April but domestic transaction prices started to fall
spectacularly, in early May, as local manufacturers ramped up production.
China’s National Bureau of Statistics confirmed that domestic crude steel
production has been rising, since March, on a year-on-year basis.
Rapidly increasing domestic steel prices and improved financial results since
the start of the Lunar New Year, encouraged Chinese producers to restart idled
It is widely accepted that underlying demand, in China and worldwide, remains
broadly unchanged. Therefore, supply-side factors have been the main driving
force behind the rapid rise in global steel values.
If China continues to boost production volumes, it is highly likely that steel
selling figures will start to deteriorate around the world.
It is notable that many US market participants argue that Chinese exports only
play a relatively minor role, domestically, as just 3 percent of US steel
imports were of Chinese origin, in the first three months of this year. However,
one US buyer remarked, this month, that if “China sneezes then the world catches
a cold”. If Chinese domestic and, more importantly, export prices continue to
slide, then no country, including the US, will be immune from the negative price
US steelmakers successfully filed trade cases for a number of flat products,
giving domestic producers an opportunity to raise prices with little resistance.
However, market participants have repeated, this month, that if US selling
values continue to rise, the domestic producers would “leave the door open” for
buyers to find new import sources, that are not covered by trade petitions.
Moreover, if Chinese domestic and export prices continue to soften, other major
exporters are likely to follow China’s lead and reduce their selling figures.
This would make imports more competitive in global markets.
This may encourage buyers, especially in North America, where prices are some of
the world’s highest, to return to purchasing from offshore sources. It would
also put a brake on rising domestic selling figures in the near term.
Consequently, with no significant change in global steel demand expected for the
rest of 2016, MEPS predicts that some of the price increases secured since the
start of the year could evaporate.
Steel Review - May 2016 Issue
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