Meps have issued a new Steel roundup, on steel demand, supply and pricing
We are now seeing the beginning of the seasonal summer slowdown in demand in the US. In addition, those domestic producers heavily involved in the auto sector are finding it more difficult to fill their order books. The rate of steel transaction price increases has slowed considerably. Service centres are keeping inventories at historically low levels because sales activity is poor. However, foreign offers are virtually nonexistent due to the weak US dollar and better prices elsewhere. Therefore, the supply/demand balance remains tight. Several local mills have already formally announced their intention to lift transaction values by a relatively modest $US40/50 per ton for September deliveries but many market players feel prices may have already peaked.
Although Canadian steelmakers would have liked to implement further price hikes, demand has not proved strong enough to justify the attempt. Values are stable this month with the possibility that they may rise in the Autumn due to ever increasing input costs. Order intake at the mills is exibiting some seasonal softness with material still available for August delivery. However, there are no signs of growing imports. Distributors' inventories are still dropping and their shipments are reported to be running at about 7 percent behind last year.
In China, the recent positive price trend has started to turn down. Market players feel the situation may be short lived as domestic supply will remain restricted, partly due to a shortfall in electricity caused by the hot summer plus planned output curbs ahead of and during the Olympic Games. Excellent sales to the automotive sector, industrial machinery manufacturers and ship builders are helping to keep supply tight in Japan. Export business is also brisk. However, dealers' shipments remain slow because of poor building demand. Inventories of stripmill products held by Japanese steelmakers and distributors, at end May, moved up by 1.6 percent, compared to April - the second successive monthly increase. Quayside stocks of imported flat products rose by 11.5 percent during June.
Since Posco's decision to ramp up the third quarter values of most products, several South Korean re-rollers have proposed higher prices. The Taiwanese general market is sluggish at present, although prices remain at a high level. Inventories are sufficient for current demand. Nevertheless, CSC cut export volumes in order to give priority to local customers whilst its output was curtailed by production problems at the No 1 blast furnace last month.
There is some concern in Poland that the economic slowdown in neighbouring West European countries could adversely affect export business. Likewise, the continuing strength of the Zloty is lowering the competitiveness of manufacturers trying to sell overseas. The situation is similar in the Czech and Slovak markets where exporters are also suffering from exchange rate problems. Nevertheless, steel demand is still holding up quite well and, overall, supply remains constrained. Further price escalation is anticipated.
The West European market continues to be characterised by supply tightness and rising prices in a climate of relatively flat demand. The availability of competitively priced steel from third countries remains at a low level. Meanwhile, ArcelorMittal announced a further increase on strip mill products of around €50 per tonne for new bookings for September delivery. The company warned of probable further upward adjustments in forthcoming quarters. These proposals have no guarantee of success in the current climate.
Despite the "bullish" attitude of the steel producers, it must be getting increasingly difficult to force many further price increases in Western Europe and North America against a background of weak demand. The steelmakers must look increasingly East for growth.