INTERNATIONAL STEEL MARKET ROUNDUP - FEBRUARY 2005
09 February 2005 - MEPS (International)

Flat Products

Both US end users and service centres continue to be overstocked as we move
into 2005. Consumption has failed to recover, partly because consumer durables' demand is sluggish and auto companies' inventories of unsold cars and trucks are high. Despite attempts by the mills to hold onto strip transaction prices, we have noted further weakness in the cold rolled and galvanised product categories.

There are few transaction price changes to report in Canada. However, the level of activity is down and customers appear to be very cautious about ordering.

Prices of domestically produced Chinese flat products continue to show an overall upward trend. Export volumes are rising whilst the import trend is negative. The supply/demand balance for strip products is very tight in Japan and is expected to remain so throughout the first quarter. Carmakers are sucking in large quantities of material, leaving less and less for the distribution sector. Consequently, stock levels are low and domestic mill prices continue their upward tendency. Inventories of imported steel at the ports, at end November, rose by 11.1 percent compared to October - the first increase in two months.

South Korean service centres have imported large tonnages of strip products,
particularly coated coil, in recent months because domestic supply was inadequate. However, the economy is slow and, therefore steel sales have been sluggish. Inventories in the distribution sector are now too high for current demand. Direct mill business is still strong, and Posco is expected to lift prices during the early part of the year. Demand in Taiwan is fair but many observers believe that, in the short term, it will weaken.

Average EU flat product prices rose by less than 1 percent in January. This is substantially below our expectations. The threat from imports, discussed in the previous issue has materialised. The mills were unable to reach their target increases for most customers because inventory levels are now sufficient for current activity. In Poland and the Czech Republic, flat product prices are still moving upwards. All the mills are reported to have good export order books.

Long Products

US demand continues to hold up fairly well for the time of year. Weakness of
the US dollar should deter imports which have kept the lid on transaction prices. Canadian construction activity is dull. The mills continue to fight hard to maintain transaction values.

Chinese prices of construction steel have started to inch up, despite the very cold weather in some parts of the country limiting building activity. Construction has also slowed in Japan for seasonal reasons.

The South Korean construction sector continues to contract, leading to a soft market for long products. The civil engineering market in Taiwan is very weak. Building is holding up a little better.

Long product prices in the EU have fallen sharply since our last investigation in December. A drop in the price of scrap in recent weeks has been the main influence in this trend. Bar and rod prices have fallen in the two new EU entrants, reported in this report, over the past month. The onset of Winter weather and only modest construction growth have impacted on selling values.

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