Thursday, October 05, 2006


In September, we have no US transaction price movements to report. Activity over the Summer was slow and values appear to have reached a plateau. However, the market is expected to weather the current quiet period, especially as there are several planned outages at mills between now and the end of the year. Service centre margins are holding up.

In Canada, demand and transaction prices for strip products are coming off the peak levels of July/August. Distributors have cut back on purchases. Many stockholders allowed their inventories to grow too much and are looking to reduce them in the coming months. Import arrivals during the Summer were very high and some material is being stored at the docks. It is likely to be November before stocks are back to normal.

Following Baosteel's lead, several other leading Chinese steelmakers have officially lowered their ex-works prices for the final quarter. The ongoing decline in market values will hit the mills badly as they are facing escalating input costs. Japanese manufacturing demand is quite buoyant from end-user sectors such as auto, shipbuilding and industrial/construction machinery. Domestic stocks of strip mill products held by steelmakers and distributors, at end July, went up by a modest 0.4 percent, compared to June. Import volumes are reducing - quayside inventories dropped 13.2 percent over the same time span.

The overburdened stock situation is being brought under control in South Korea, where demand is better now. Posco boosted prices of commercial grade strip products in July (as reported) and no further adjustments have taken place since. Taiwan's CSC has now announced new higher steel prices for fourth quarter domestic deliveries. Some market players believe this may be the peak for this cycle because activity has weakened as prices constantly spiral upwards. The company will also cut supplies by 5 percent in period four and the first quarter 2007, due to scheduled maintenance. Volumes available to Japanese customers will continue to be restricted.

West European market activity is slowly returning to normal, following the extended Summer break. There is some uncertainty regarding fourth quarter strip product prices, despite bullish announcements of rises by producers. Buyers are reluctant to pay substantially more because they perceive as mounting negative pressure from third country imports.

We can report a further wave of price advances in Poland, amidst sharply rising steel consumption created by the economic recovery. Czech/Slovak customers have been forced to accept further significant price increases, despite some mild resistance. A number of producers are already talking of another hike quite soon, supported by good levels of demand. Steel stocks at the service centres are very low. Distributors, who are reluctant to let inventories become excessive in case prices drop suddenly, will only order what is absolutely necessary.



MEPS comments regarding European prices reflect the feedback I am getting in the UK. Whilst the mills remain "bullish" on prices, the competition from overseas manufacturers of steel components, is making it very difficult for buyers to accept increases. Traders seem to be reporting that import prices are remaining steady, but whether or not price reductions in China will make the European market more interesting to exporters remains to be seen.



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