Global Steel Prices Continue to Trend Upward

Steel prices expected to continue climbing.

April 6, 2010

The latest business in the United States has been settled at marginally higher transaction values than in February. Producers are pressing for further increases next month, citing their growing input expenditure. They are claiming full melting schedules in the facilities open at present. However, several previously idled furnaces are set to come back on stream in the second quarter. Distributors note that the tonnages available for April are limited, but see no evidence of demand picking up and are, consequently, not overloading their inventories.

Canadian mills report strong order intake, albeit at slightly reduced levels from period one, when many customers were replenishing their stocks. Transaction figures continue to climb rapidly on a monthly basis and further movements are expected in April. Nevertheless, service centers recount weak end-user consumption. They are ordering no more than is absolutely necessary. There is a reluctance to build stocks, given the risk that the present price escalation could go into reverse.

Rising outlay on raw materials, particularly the anticipation of much higher iron ore costs, is driving Chinese domestic market prices ever upwards. Despite some concerns over government intervention in bank lending, market sentiment is good. Quotations for export business are also increasing but overseas buyers are reacting quite cautiously, so not a great deal of orders are being concluded at present.

Japanese producers have announced they will be looking to implement substantial price hikes in April. The size of the eventual increase could depend on the outcome of ongoing raw material negotiations. The integrated steelmakers have reduced supply to the dealers while they try to meet strong demand from export markets and domestic auto manufacturers. However, inventories of strip mill products held by the mills, distributors and processors went up by 2.8 percent at the end of January from a month earlier. Meanwhile, quayside stocks of imported flat products, as end February, fell by 11 percent from the previous month to hit a one year low.

Availability of coil is relatively limited in South Korea. It is envisaged that Posco will adjust domestic selling values upwards, shortly, as prices of imported raw materials are expected to escalate in the months ahead. The company, along with other local steelmakers, has already lifted export quotations.

The Taiwanese economy is forecast to grow substantially this year. Certainly, the steel market is already reviving. Order intake is robust at local mills as customers buy ahead of announced and anticipated increases. CSC plans an average domestic price rise of 3 percent for April/May production. The advance is thought to be relatively modest in order to help improve the competitiveness of downstream industries.

Although Polish demand is showing few signs of improvement, stock levels are now under control. Distributors continue to order cautiously. Producers have pushed through a sizeable increase during recent settlements. Availability is relatively tight as the mills appear to have reduced output. The economic outlook in the Czech/Slovak markets is poor. The steel trading environment is lethargic as underlying demand remains muted. Buyers report that the domestic mills are offering restricted quantities in order to secure higher prices. Resale values are under tremendous pressure, with some distributors selling below replacement costs.

Recent and anticipated escalating international raw material expenditure has led to sharply rising West European steel prices against a backdrop of stagnant demand. At present, this is causing a real dilemma for the mills, service centres and end-users. Difficulties associated with obtaining credit insurance are exacerbating the low level of business activity. Many market players question whether the price increases will be sustainable if consumption does not pick up.