As expected, poor consumer demand and overhigh inventories led to further transaction price slippage during August, in the US. However, the bottom appears to have been reached and values have picked up in recent weeks. Although rising scrap costs were the initial driver, inventory levels have now come down and import penetration is currently quite low. Further rises are anticipated in October.
In Canada, the inventory drawdown is progressing well. Stockists' shipments are beginning to improve, although not quite to the levels of last year. Some mills are now quoting January delivery because of production problems. Not surprisingly, customers have conceded quite substantial transaction price hikes on all flat products.
Chinese demand is strong from the auto, home appliance, power and machinery sectors. However, constantly increasing domestic steel capacity is undermining market prices. Japan's major mills will reduce output during the October/December period in an effort to support prices and curb oversupply in the market. Steel service centre inventories, which are in excess mainly due to imported material, will take some time to adjust. However, for the moment, values have stopped their downward trend.