Negotiations on hot rolled steel coils for Asia begin was to be concluded before the Chinese New Year.
Main prices of them for February and March 2012 shipment are USD 680 CNF and rose by USD 30 to USD 40 compared with those for January 2012 shipment. It will be March 2012 shipment onward for them to reach the level of USD 700.
For these few years, hot coil prices for February and March 2012 shipment had shot up. It used to be normalized for a customer to make a contract in anticipation of price increase of hot coils as price hike of raw materials for a blast furnace like iron ore and coking coal from April onward had been unavoidable to push upward pressure on product prices. For this reason, it could be said to be easy for a blast furnace mill to make negotiations on hot coils for March and April 2012 shipment.
However, it is uncertain of price down of blast furnace materials from April onward to what extent this year but at least a feeling for no price increase has been strengthened. Then, each customer seems to feel that there will be no price increase of hot coils so much in future although there will be no price down of them. It is said to be an actual feeling of a customer that it cannot be seized for the time being what level of price increase is reasonable.
Although at present, hot coil prices have risen by USD 30 to USD 40, it's not as if surge of demand pushes up them. In the previous quarter, there was a case that some blast furnace mill decreased largely its prices of hot coils in anticipation of price drop of blast furnace materials, and it is the situation that such mill has continued negotiations to retrieve such markdown.
Price increase of this time comes from the results that a mill gathered quantities from a customer to which preferential treatments like a discount system were applicable or negotiations were undertaken with a customer which was using hot coils with higher extra prices of quality while a customer other than above is still discreet in acceptance of price increase. However, there has been really no customer to express price down.
In Korea, POSCO is said to show its intention to increase domestic prices in this quarter (actually for shipment of February through April). But a range of markup is not revealed yet. It seems to have noticed price increase against a distributor like a coil processing center. For export, the company is said to increase by about USD 30 to USD 650 FOB.
In Korea, there are many contracts by month, and contracts by quarter are decreasing but in this quarter some customers are said to come out to request contracts for shipment of plural months. There is a possibility that the domestic prices of hot coils begin to stabilize eventually. There is a perspective for POSCO to notice increase of prices as early as the middle of February. While, its price increase delayed so long by government pressure last year. In this year, there is the presidential election in April. It is concerned that once again its price increase is shelved by governmental pressure.
The Chinese mills' negotiations for Korea seem to have been undertaken with the markup of USD 20 to USD 30 against a single month shipment of February or March. There is no information yet that the USD 30 markup is accepted but there seems for the USD 10 to USD 20 markup to be accepted.
It is not certain how demand is after the Chinese New Year. However, as it enters the demand season from now, it is expected to come close to an aim of USD 800 CNF breaking USD 700.
(Sourced from TEX Report Limited)
