Steel pricing is of course one of the most important subjects to those of us who produce it, use it or trade in it. Whilst in recent years pricing trends around the world have tended to follow each other, more recently I have noticed conflicting reports regarding the direction of prices. This is confirmed in the most recent report from MEPS . Trading between world regions would normally lead to an equalising, but factors such as the cost of oil and a shortage of international sea freight may have a temporary impact upon this.
Additionally local factors including Chinese exports within Asia and the aftermath of the hurricane in the USA can lead to imbalances. It is interesting to note that demand in the USA has increased, as it remains flat within Europe and despite price rise announcements for the fourth quarter by a number of EU producers, the marketplace is reluctant to pay any increase (in fact we have seen a little slippage).
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.
Source: MEPS - International Steel Review
The business of forecasting steel pricing remains a precarious business !