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International Steel Market Roundup - November 2004

MEPS (International) : 08 November, 2004  (New Product)
MEPS monthly roundup of flat and long products world-wide. For flat products, in the US, real consumption remains healthy, while for long products, prices have moved up in several EU countries this month and are expected to increase further as European scrap charges are on the rise again.
Flat Products

In the US, real consumption remains healthy. However, distributors' inventories are high. Service centres, concerned at holding such expensive stocks, are buying more cautiously. Certainly, all speculative purchasing has ceased. The auto manufacturers have cut back their production and it is expected that demand in the last part of the year will be at lower levels. Market conditions are then expected to pick up in the first quarter 2005. Availability from off shore sources has improved. Domestic transaction prices have softened.

Canadian activity is subdued. Published raw material and energy surcharges are likely to go up by $C40 per ton for November. However, due to increased import offerings and the price slippage in the US, these increases will be difficult to realise. Tonnage is arriving from South America, Egypt, Turkey, Taiwan and Russia at values that are still about 10 percent under Canadian mill prices. Service centres with these products are discounting to obtain additional sales. This is normally the factor which creates the downward pricing spiral for local steel producers.

Chinese traders are still loath to place orders with overseas suppliers without careful consideration because international prices are so much higher than those in the domestic market. For the same reason, export volumes are increasing rapidly.

The Japanese local market is quite strong and this is helping to offset a recent fall off in export business, particularly to South Korea and China. Imports continue to strengthen. Inventories at the docks, as of end August, increased by 4.2 percent, compared with the previous month and by over 30 percent from a year earlier.

In the fourth quarter, demand from South Korean machinery manufacturers, electric home appliance makers and auto producers is predicted to rise. The relatively low level of local steel prices compared to international ones continues to keep import penetration under control.

In Taiwan, home market prices are still being driven by escalating raw material costs. We can see no significant improvement in consumption. Players are anxious about the situation in China. Although business there has picked up after the long holiday, the prices that Chinese buyers can afford are not attractive.

EU strip producers have pushed through their period four price proposals. Orders placed in the last month have been settled at even higher values in several countries. Arcelor is considering raising prices in the first quarter 2005 by 3 to 7%, depending on product. Corus and ThyssenKrupp are likely to lift their figures by a similar amount. As a result, EU price levels are nearing our average world market values. This means that we could see an increase in imports in the near future. For the moment, offers from third country suppliers remain limited in most countries.

Polish domestic sales are improving in-line with the general economy. Import penetration is modest and price trends remain positive. The fourth quarter is sold out in the Czech and Slovak Republics. Distributors are carrying very little stock. Their margins are good. End users' inventories are also low. Local producers have already announced that prices will be even higher in the next trimester. An amount of 4 to 5 percent is being quoted. Customers will have no choice but to accept the decision.

Long Products

The commercial construction market is weak in the US. A slide in scrap values caused several mills to lower their raw material surcharges. In some instances, this has not been offset by a similar basis price increase. Canadian building activity continues to slow. We have noted some minor transaction price reductions since September.

The construction steel market in the Guangzhou region of China remains basically steady after the long holiday with just some small price fluctuations. However, in other areas of north and eastern China the deterioration was more marked. Investment in real estate continues to slow. The outlook in Japan is optimistic - October/December is traditionally the best quarter for demand from civil works projects.

South Korean building output is forecast to become even more sluggish during the final trimester, partly because of deceleration in the real estate market. A continuing drop in public sector works is not helping the situation. Nevertheless, prices for most long products are higher this month, driven by escalating raw material costs. Taiwanese sales are satisfactory. We can detect upward price pressure for most products.

Prices have moved up in several EU countries this month. They are expected to increase further as European scrap charges are on the rise again. Polish demand has been strong throughout the peak Summer building period but growth in construction activity is lagging behind many other sectors. Building work continues apace in Slovakia and the Czech Republic. Things are expected to slow at the turn of the year.

Source: MEPS - International Steel Review

This article has been extracted from the October issue of MEPS International Steel Review
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