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International Steel Market Roundup - January 2005

MEPS (International) : 12 January, 2005  (New Product)
This article has been extracted from the December issue of MEPS International Steel Review
Flat Products

US market activity is flat. The mills, faced with weak fourth quarter order books, started seasonal maintenance shutdowns in November and these continue this month. Customers' inventories are high. Mill transaction prices continue to slip. We have unconfirmed reports that surcharges are not being universally applied, especially to large volume purchasers. Steel market conditions are expected to improve in the first quarter and AK Steel Corp. has already announced a $US50 per ton hike. Canadian market activity continues to be subdued. However, inventory levels appear to be more tailored to present day demand than those in the US. Nevertheless, we have monitored further drops in transaction values over the last four weeks.

Chinese stock levels are low and consumption is satisfactory. Following Baosteel's lead, several other major domestic steelmakers have now lifted their official price for the first quarter of 2005 by between 7 and 8 percent. Export business continues to flourish at the same time as import volumes recede. Impacted by earthquakes, tropical storms and ongoing maintenance of steel plants, Japanese producers have slashed export volumes over the past few months. The South Korean economy is slow. Although overseas sales of manufactured goods are high, domestic business has contracted. Despite this, local steel consumption of flat products is forecast to keep firm throughout 2005. Further price increases for period one appear unavoidable.

On November 25, CSC announced a number of price hikes for first trimester shipments to domestic customers ranging from $NT800 to $NT1300 per tonne. The downstream re-rollers and coating mills are now trying to lift their prices ahead of this increase in their costs. However, more and more cargoes with cheaper new offers, originating from neighbouring countries such as China, India and South Korea, are affecting consumers' confidence. The weaker US Dollar against the local currency is not helping the situation.

Business is pretty slow throughout Western Europe. The stockbuild caused by speculative purchasing has been exacerbated by weaker consumption during the fourth quarter. Several of the major EU mills have now confirmed new higher target prices for period one. The current strength of the Euro against the US dollar will make the European market more attractive to imports in the future but high freight rates and tightness in the availability of vessels could provide some protection for EU producers.

Inventories of strip products are starting to build in Poland and order intake has slowed. The Czech/Slovak market is very quiet. Shortages experienced earlier in the year have totally abated. Material is now available from Russia and Ukraine - a signal that supply has eased substantially. Producers are still speaking of higher prices in the first quarter but, for the moment, buyers are not ready to commit to forward orders.

Long Products

US long product supply has increased lately as high prices have attracted imports. However, as demand is holding up, pricing has been relatively firm. Canadian building activity is fairly dull. Nevertheless, the mills have fought hard to maintain transaction values.

The construction steel market in China continues to show an overall downward price trend as demand fails to recover. Government measures have impacted on the residential building sector. Infrastructure projects continue to flourish. The immediate outlook for sales is poor because of the onset of cold weather in many parts of the country.

Japanese commercial building activity is strong but residential construction has failed to pick up. In addition, there are fewer civil engineering projects ongoing at present. Depression in the South Korean construction industry has led to a flat market for long products. Due to a slowdown in building in Taiwan, together with a weakening in regional scrap values, most construction steel products have registered price declines since last month.

EU domestic demand and prices are falling because of seasonal factors. Export markets offer limited opportunities. Several mills are still contemplating their length of closure over the holiday period. The recent positive price tendency in Poland has reversed. Growth in the construction sector lagged behind other steel consuming segments throughout the year and, throughout the Winter period, no improvement is likely until next Spring. There is also seasonal negative pressure on Czech/Slovak values.

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