INDIA September 30 2014 11:25 AM
LONDON (Scrap Register): Despite a recent slight softening in US flat products transaction prices, they are still very high relative to the rest of the world, according to MEPS International.
This is attracting substantial volumes of imported material. Demand is slowly, but steadily, improving. However, supply has grown – not only from an inflow of offshore steel but also from domestic sources as capacity utilisation moves up towards 80 percent. Inventories are adequate for current conditions. Possible protectionist moves by the US government have created some caution amongst buyers but have not deterred overseas suppliers, so far, said MEPS.
Canadian mills report strong order books into October. The auto and energy sectors are performing well. Strip mill product prices are holding up. Service centre buyers are expecting a little price weakness in December, in the light of cheaper imports that are due to arrive before the close of the Great Lakes navigation. However, domestic steelmakers are doing everything in their power to keep selling values firm.
In China, Baosteel has announced it will cut major flat product official ex-works prices for deliveries in October, which is, traditionally, a peak month for steel consumption. Buyers were anticipating the decreases, which reflect sharp downward movements in the market place over the last two months. Meanwhile, output continues to grow and inventories remain in surplus. Export volumes are expected to expand, year-on-year, as producers cut overseas quotations to boost trade.
MEPS has noted some recovery in domestic sales in the Japanese market since July, following April and June’s weakness. The supply/demand balance is likely to continue to improve over the next few months due to the upcoming peak business season. However, exports dropped again in July, year-on-year. Import volumes grew in the same time frame. The main source of the rise was supply from China. Flat product prices, with the exception of hot rolled coil, were unchanged in August and September.
The outlook for the South Korean steel scene remains pessimistic. Domestic producers are not only having to cope with the prospect of slowing economic growth in the second half of 2014 but are also trying to contend with significant import pressure. Chinese steelmakers are increasing export volumes, with their share of the South Korean market now well over 20 percent. Stagnant demand and oversupply have led to further substantial discounting. In Taiwan, major integrated producer, CSC, will leave domestic list prices for October/November contracts unchanged from those of September in order to counter cheap offers of material from China. Local consumption is slowly recovering.
Although Polish transaction values are unchanged in euro terms, they are slightly higher when measured in zloty due to currency fluctuations. Slab shortages, created by the crisis in Ukraine, are not affecting the production of strip mill products. Nevertheless, the mills are demanding price rises. In the Czech/Slovak region, the situation in Ukraine has negatively influenced supplies of raw materials and electricity. However, the outcome is not as bad as might have been expected. Market participants did not really anticipate any major developments in flat product demand, following the holidays, and this has proved to be the case.
In Western Europe, prices held steady through the summer. More recently, ArcelorMittal announced a proposed increase of €20 per tonne for all new business to be delivered in the final trimester. Nevertheless, most October orders have already been settled at the old prices. It remains to be seen whether the rise can be imposed for the remainder of the quarter. Most buyers believe that current consumption is not strong enough to support an advance, particularly as the producers’ raw material costs are reducing< MEPS concluded.