TEX reported that negotiations on hot rolled steel coils for the remote areas like Middle East, Central and South America and so on ended recently for July 2012 shipment.
Due to the seasonal factors like Ramadan (July 20th 2012 to around August 18th 2012) in Middle East, and the rainy season in Central and South America, it falls usually in the off demand season. Therefore, from the initial stage of negotiations, each customer showed a stance not to purchase without price down, and raised a grand chorus of price decrease.
The Japanese mills had intended to realize price up even by a few dollars, but they seemed to be forced to make severe negotiations caused by a pressure of cheap prices of the Russian mills and so forth as they did not have a pricing power.
As a result, their highest and majority prices seem to have become USD 660 CFR and USD 640 CFR respectively. While, prices of Russian mills are said to have been the cheaper ones of USD 615 to USD 620 than those prices. Korea's Hyundai Steel and so on seem to have settled at USD 640 CFR.
The Japanese prices of blast furnace mills fell into the higher range but seen from the level exceeded USD 700 CFR in the previous month, the situation seemed that they could not help but decreased their prices by USD 40 to USD 50. The Japanese electric furnace mills are said to have proceeded with negotiations at USD 620 FOB just like those for Korea. Their prices for Korea are subtle but are said not to cause destabilization of prices for Middle East so on because there were further cheap prices.
Anyhow, prices for the remote areas dropped by USD 40 to USD 50 from the previous month. In each country, prices had been raised even slightly from the beginning of this year to June 2012 shipment, and price up of about USD 50 was realized. This has gone back apparently to square one at a blow.
The seasonal factors consist mostly of price down as usual but aggressiveness of the Russian mills and launching of new comers like the Indian mills are mentioned as the different factors from usual. Such views that Russia's export drive caused by flow of inventories piled up due to ice melting of the Black Sea or sought the remote area market due to slackness for Europe were representative as a temporary phenomenon. In the backdrop that nevertheless, such export drive has continued, there seems to be the weakening ruble. From the beginning of this year, the ruble depreciated by 12 to 13%. For that reason, as export competitiveness increases, it is considered to continue in negotiations for August 2012 shipment as well.
In case of new comers like Brazilian and Indian mills and so on, they are said to become easy to access the market due to weak own currencies. The Indian mills are aggressive on export of coated steel products rather than hot coils. Their prices are said to be around USD 810 CFR, and as the re rolling mills in the remote areas are forced to compete with these prices, they are to request to lower prices of material hot coils against a blast furnace mill.
Coming to July 2012, negotiations for the remote areas will start for August 2012 shipment. The bright indicators of the market upturn cannot be found for the time being. Rather, the reverse signs are increasing. Seeing Central and South America, Sidor of Venezuela had not appeared in export as it had tied up with domestic supply due to facility troubles. However, such situation will be subtle from now on. If so, another competitor increases, and the environment comes out easily that a mill to cut its prices appears. While, hot coil prices in the USA have also continued to drop by USD 50 even from the beginning of June 2012. The US mills are thought to sell out hot coils for Central and South America in order to cut their inventories.
In Middle East as well, in addition to continuation of the Russian mills' offensive, the European mills are predicted to seek the market in Middle East depending on the European situation. If it happens, there a viewpoint that hot coil prices become USD 600 CFR and its price level of USD 500 FOB will appear one after the other.
The severe environment that negotiations on hot coils for the remote areas keep to creep the bottom or break the bottom will surely continue.
Source - TEX Report Limited
(www.steelguru.com)
