MEPS GLOBAL STEEL PRICE RISES AGAIN
The MEPS world all products composite steel price
increased in June by 0.6 percent - the sixth consecutive monthly rise. However,
amid a modest global demand outlook, MEPS predicts that steel prices are now
very close to their peak for the current cycle.
The North American average price advanced by 5.8 percent in June as trade
petitions and supply shortages continued to put upward pressure on domestic
selling figures. From MEPS research, this month, the consensus view from steel
industry participants is that selling figures are likely to stabilise, at best,
in the near term. Purchasing activity, in fact, is expected to soften in the
second half of the year.
In June, both Asian and European selling values fell, when measured in US dollar
values, by 3.4 percent and 2.3 percent, respectively, month-on-month.
In China, steel prices are likely to come under negative pressure in the second
half of the year. The steel sector has been repeatedly urged to reduce excess
manufacturing capacity. However, we detect little evidence to suggest that
significant production cuts are being made.
In fact, in response to domestic price surges at the start of the year, local
mills ramped up output by starting up idled facilities. This is borne out from
information issued by the China Iron and Steel Association that domestic daily
steel output in mid-May rose to its highest level since June 2015.
As a consequence, more steel will be made available for export. This is likely
to put downward pressure on steel selling figures around the world as low-priced
exports from China are likely to become available in global markets.
Southeast Asia remains one of the few regions of the world in which steel demand
exceeds domestic supply. This makes this area a prime target for low-cost
Chinese imports and the prospect of declining selling values.
With the likelihood of increased global supply of steel from the mills and
expanding availability, a continuation of the steel price revival is limited.
Steel Review - June 2016 Issue
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