SEASONAL LULL IN ACTIVITY KEEPS STEEL PRICES IN CHECK – MEPS INTERNATIONAL LTD
US flat product transaction values are
currently slightly lower than those reported in June, according to MEPS.
However, some minor upward pressure has been noted in recent weeks. Mills in the
mid-west still have relatively long delivery lead times due to supply problems
earlier in the year plus scheduled outages at US Steel and ArcelorMittal.
Moreover, there is excellent demand from the auto sector. Manufacturing is
strengthening and construction is improving. Although overseas material is very
competitively priced at present, possible protectionist moves by the US
government are creating a great deal of caution amongst both traders and
potential customers, regarding forward ordering of material from third
countries, primarily China.
With the exception of hot rolled coil, Canadian transaction figures are holding
firm but there are some mitigating factors. The reline of ArcelorMittal’s
Chicago furnace has led to orders being moved to Dofasco, pushing delivery lead
times out by two to three weeks. Demand remains sluggish and cheaper, offshore
material has arrived, with more to come. Inventories remain on the low side.
There is still a supply glut in China as production remains high. Consequently,
prices have continued to head downwards since MEPS last report. However, overall
inventory levels declined in June. A recent stimulus plan, combined with new
infrastructure projects, is expected to support steel consumption over the
coming months. Export volumes continue to grow, year-on-year, as producers cut
overseas quotations to boost trade.
As the economic recovery continues in Japan, domestic order intake rose in May,
year-on-year, allaying fears that April’s increase in consumption tax would
cause serious damage to steel consumption. In contrast, export volumes were
still declining. Imports continue to grow, despite a weak yen. Flat product
market prices are firm.
Stagnant demand and oversupply have led to discounting in South Korea. Economic
forecasts have predicted a slowing of growth in the second half of 2014. This
creates a gloomy outlook for the steelmakers who are also having to contend with
a great deal of import competition. The mills are looking to overseas markets to
offload their surplus capacity.
In Taiwan, major integrated producer, CSC, will leave domestic list prices for
September contracts unchanged after decreasing them for the July/August period.
The third quarter is, traditionally, a time of low demand because of the rainy
season in South East Asia. However, the company has started to see signs of
recovery and does not think it is necessary to cut prices further.
Polish activity is no better ahead of the summer vacation. Due to changes in the
exchange rate, effective values have increased slightly in the local currency.
This represents unchanged prices in euro equivalent terms. The Czech economy is
slowly recovering, as is consumer confidence. Steel output is expanding as
industrial sectors show signs of growth. However, selling values remain under
Activity in the West European market is quiet ahead of the holidays. Although
consumption is strengthening in several countries and economic indicators are
good, producers, keen to book orders, have agreed further small price
reductions. Customers point out that the mills have relatively low raw material
costs and cheaper third country imports are readily available.
Steel Review - July Issue
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