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ALL PRODUCTS CARBON
STEEL PRICE FORECAST – APRIL 2009
WORLD (GLOBAL) - ALL PRODUCTS
COMPOSITE CARBON STEEL PRICE FORECAST
The MEPS – Global World All Products Composite transaction price was, as
anticipated, slightly lower in April. Global demand is weak for both long
and flat products. Despite continued production curbs in all parts of the
world, oversupply remains a problem. This is due to a substantial
reduction in inventories in the supply chain over the past six months.
However, it is now becoming clear that the rate of steel price decline is
slowing. This is partly because the inventory drawdown is coming to an
end. Further price reductions are anticipated over the next few months.
The prospect of a significant cut in iron ore contract prices is leading
to fears that prices will drop further.
An early revival in steel prices is unlikely. However, we do believe that
a recovery is probable in the final quarter of the year and into 2010. The
inventory depletion phase will be almost complete. Customers will need to
start reordering on the mills. Delivery lead times are expected to extend.
The mills will, almost certainly, maintain some production curbs.
Moreover, the benefits of the various governments’ incentive packages
should be filtering through to the steel sector as auto sales improve and
infrastructure/construction projects start up.
EU – ALL PRODUCTS COMPOSITE CARBON
STEEL PRICE FORECAST
The MEPS - EU All Products Composite transaction price decreased by
approximately €30 per tonne in April. This was slightly below the figure
anticipated last month. Competition from cheap dockside material forced
local producers to reduce offer prices for flat products as they competed
for the few orders available. Inventory depletion slowed with high stock
levels for strip products remaining at many distributors. Decreases in
scrap costs during March pushed down transaction values for all long
categories. Consumption from end users was low. Mills continued to cut
production in an attempt to re-balance supply and demand. With very few
sales being concluded, however, this has yet to have any real effect on
steel prices. Export opportunities declined further. Both the commercial
and residential building sectors continued to weaken. Even projects that
were ongoing have now been put on hold because of a lack of finance.
Selling figures should begin to stabilise in the second half of the year
as domestic markets started showing small signs of recovery during the
latter part of April. Recent rises in scrap costs could push long products
prices higher after the summer break. However, there could still be
downward pressure on transaction values as end user consumption will,
almost certainly, remain weak in the short term. The conclusion of the new
iron ore contract may also weaken transaction values for flat categories
lower. Prices are then forecast to recover during the second half of 2009
as mills re-balance supply and demand by continuing to cut output and
extending summer shut downs. The availability of credit should also
improve later in the year. This is likely to lead to increased buying
activity and accelerate the inventory depletion process. However, rises in
selling figures may be limited by a resurgence in import volumes. Larger
advances are forecast for early in 2010.
NORTH AMERICA – ALL PRODUCTS
COMPOSITE CARBON STEEL PRICE FORECAST
The MEPS – North American All Products
Composite transaction price moved down by over 5 percent in April. This
was in line with our March forecast. End user demand remained poor. Scrap
costs pushed long categories lower this month. Customers are still buying
on an “as needed” basis. Consequently, the producers order volumes were
low. Distributors are fighting for sales in a bid to offload surplus stock
and raise cash. Reduced operating rates are also putting pressure on mill
production costs. Inventory depletion continued throughout the supply
chain. However, the pace of de-stocking slowed at US service centres, with
gaps beginning to appear for certain grades/sizes. These are, however, not
being replaced. Import purchases are too risky due to the extended
delivery lead times. The housing market is still facing difficult times
ahead, despite a 22 percent rise in new start-ups in February.
The All Products Composite price is forecast to continue decreasing over
the next few months, even though the steelmakers are operating close to,
or under, the cost of production. Falling raw material values are likely
to put additional downward pressure on selling figures as demand from end
users remains low. However, we do believe that we are nearing the bottom
of the current price cycle. Import volumes are dropping and local mills
are expected to maintain production cuts and extend summer shut downs. We
predict that transaction values will stabilise around the middle of the
year.
Government stimulus packages should begin to lift steel demand during the
second half of 2009. Credit restrictions are also likely to ease. This
should provide customers with the ability to increase their purchases. Low
inventory levels in the market could then create supply shortages as order
volumes grow. This will, almost certainly, lead to extended delivery lead
times and rising prices from the fourth quarter onwards. Seasonal factors
may temper these advances initially. Larger gains are then predicted for
early 2010.
ASIA – ALL PRODUCTS COMPOSITE CARBON
STEEL PRICE FORECAST
The MEPS – Asian All Products Composite transaction price moved up
marginally in April. However, domestic price decreases were noted in all
countries except Japan. Exchange rate movements, particularly in the South
Korean Won, pushed the figures upwards when converted into US dollars.
Output in the auto, appliance and construction industry negatively
affected the cold rolled and coated sectors this month. Decreases in raw
material costs put negative pressure on long products transaction values.
End user demand was weak. Sales to distributors were low due to ongoing
inventory depletion. Consequently, the mills tried to increase exports to
help boost their order books. Nevertheless, poor global demand made this a
difficult task, even for Chinese traders who have had export tax rebates
reinstated. Local steelmakers continued to cut production in a bid to stem
oversupply across the region. Building developments are being cancelled or
postponed due to weakening economic conditions.
Transaction values for all products are forecast to decrease over the next
few months as few signs of a pick-up in end user demand are evident.
Distributors are expected to continue de-stocking with no rebound in sales
anticipated until the excess inventories have been digested. Negative
price pressure is also likely once the new iron ore contracts have been
concluded, with Posco having already promised to adjust steel selling
figures after the negotiations are completed. Weakening scrap costs are
predicted to push prices for long categories lower in the short term.
However, the oversupply situation may begin to ease shortly. Many local
mills are scaling back production and several steelmakers are choosing to
carry out maintenance in the hope that this will help to re-balance the
market. Some sales recovery for long products in China is predicted in
May/June, when several large projects start up. The Shanghai-Hangzhou
railway in particular should generate demand in the longer term. Price
stability is predicted for the third quarter.
A steady increase in steel consumption is predicted for the second half of
2009 as government schemes get underway. Prices are, therefore, forecast
to advance in the final few months of the year. However, oversupply in
some categories could temper these rises as new capacity comes on stream
in China. Larger price improvements are forecast for early 2010 as a
recovery in the world economy commences.
SOURCE:
MEPS INTERNATIONAL LTD.
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