TEX reported that negotiations on hot rolled steel coils for the Korean re rolling mills have not been concluded yet for June 2012 shipment, and if such situation continues, shipment is likely to be turned actually into July 2012 one as June and July 2012 shipment.
One of the factors that negotiations are not concluded is that the won can't stop weakening. In the initial stage of this quarter shipment, the exchange rate was one dollar to KRW 1,120. However, at present, it becomes one dollar to KRW 1,180 and it is seesawing. For this, as the Korean market prices are going down in dollar volume, and the Japanese mills are forced to revise their prices downward, the situation becomes for customers to be difficult to fix prices. Another factor is that anticipation of low prices of hot coils is spreading. Seeing the Vietnamese market, prices seem to have dropped by USD 20 to USD 30 to USD 620 to USD 630 FOB at present. However, as customers in that country are anticipating further decrease, they do not decide to buy at this price level, and are said to be expecting price decrease by USD 50 or so. It means they are aiming the USD 500 level of hot coils.
The Chinese mills are said to quote USD 20 to USD 30 of price down for shipment of next quarter or July 2012 in negotiations on hot coils for Korea. In this case as well, price down is anticipated. Accordingly, the Korean customers expect further price down, and have not been able to take a step to price settlement. The demand environment of hot coils are changing every week, and therefore, the situation becomes for both Japan and Korea sides to have no remedy but to watch. There is though information that some Japanese mills finalized negotiations on hot coils with Korea. But it is uncertain whether those are for the re-rollers or pipe manufacturers, and it is subtle whether that will become an indication for each Japanese mill.
Price negotiations among the Korean blast furnace mills like POSCO and re rollers seem not to have been settled yet. However, a mood of price increase is said to have gradually been fading out, and prediction of leveling off finally begins to come out. Rather, as the price difference between for distributors for which price rise was preceded and re rollers is expanding, price down is forecasted for distributors.
Hot coil price for the Korean re rollers is uncertain but it seems to be below KRW 800,000 per tonne. If it is assumed as KRW 750,000, it becomes the level of 630 in dollar conversion. Consequently, the Korean hot coils are seen to be competitive rather than imported ones considering ocean freight. Under the circumstances, there is a strong possibility that contract quantity of not only the Japanese but also Chinese mills will be reduced.
Source - TEX Report Limited
(www.steelguru.com)
