UK based MEPS said that the USD 40 per short ton hike, announced by the majority of US mills at the start of the summer, has been, at least partially, implemented. However, there is now renewed downward pressure on transaction values.
Mill delivery lead times are very short due to slow order entry. Global iron ore prices have collapsed and the sharp run up in scrap costs has recently reversed. The producers are trying to hold on to current prices as long as possible but MEPS expects to see some further declines quite soon.
Chinese transaction values continued to slide over the last few weeks but market sentiment is slowly being restored as the government has approved a number of projects. Moreover, Baosteel's move to keep its official ex works prices flat has bolstered confidence. However, problems with overcapacity and declining export opportunities in traditional markets persist.
There is growing anxiety in the Japanese market that demand will slow substantially in the final quarter of 2012. Distributors are already keeping a watchful eye on their inventory levels and are cutting down their purchases. There is downward pressure on prices from weakening raw material costs but, so far, transaction values are unchanged.
In South Korea, overall inventories of flat products held by distributors continue to climb. At the end of July, they had swollen by over 5 percent, month on month, due to dull domestic demand caused by the economic slowdown. Overseas sales are also suffering because of the financial crisis in important export markets.
The financial crisis in the euro zone is undermining business confidence throughout Western Europe. The higher basis values targeted by the mills are proving hard to achieve because of low demand.
Moreover, customers are aware of the cheaply priced export offers from China, even though the long delivery lead times are not encouraging order placement. Steelmaking raw material costs are moving down. There are fears that mills may need to cut their prices in the next few months.
Source - MEPS - International Steel Review
(www.steelguru.com)
