HIGH
NORTH AMERICAN STEEL PRICES COULD LEAD TO SURGE IN IMPORTS SOON
Steel people spend a lot of
time talking about how the industry today is truly global.
Developments in one part of the world impact trading conditions
everywhere. One result of this is that steel prices in the various
regions tend to move in roughly the same direction at the same time.
But just at present the opposite is
happening. MEPS analysis shows that strip product prices in Europe
are basically flat, while they are rising in North America and going
down in Asia. Last month's values in these three regions were within
about $US10 of each other. This month there is a range of almost
$US100 per tonne between the lowest (Asia) and the highest (North
America).
Looking at average transaction prices for
hot rolled coil, September values in the European Union stand at
just below $US500 per tonne, only a few dollars different from last
month’s figure. EU prices have lost more than $US200 per tonne
over the course of this year and continue to languish, pending a
correction of the stock surplus.
In Asia, the average hot rolled coil price
this month is around $US480 per tonne, down by almost $US20 per
tonne month-on-month and more than $US100 per tonne since the peak
earlier this year. The price has been depressed by the continued
build-up of additional production capacity in China, over-stocking
and increasing Chinese exports.
But in North America, the September hot
rolled coil price jumped by almost $US70 to $US580 per tonne. This
is partly because of increased raw material surcharges related to
higher scrap prices. There are also signs of higher demand, as
orders are being quickly placed for steel needed for reconstruction
work after the recent hurricane.
Raw material surcharges look like
increasing again in October because North American scrap costs have
strengthened further. This is partly because of disruption to
supplies of scrap and other raw materials caused by the hurricane.
The current divergence in prices globally
is quite unusual. International trading in steel is a highly
developed business, and the flow of trade around the world tends to
smooth out uneven price patterns. Recent increases in ocean freight
rates – up 75 percent since the start of August – may mean this
correction takes a little longer to occur.
