Analysts forecast long and flat steel demand to be relatively low in Q1-2010

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

31 Dec 2009

Unlike US and EU, where steelmakers finish the year generally on a major note, recession in Middle East market is going on. Demand for flat steel products stabilized in recent days at low level, as well as demand. The cost of Russian hot rolled steel in Turkey, Iran and other countries of the region makes averagely USD 550-560 per tonne CFR with delivery in January and February, cold rolled steel for USD 630-640 per tonne CFR. Ukrainian companies offer hot rolled steel for USD 515-540 per tone CFR, but cold rolled coils go on the same level with Russian material.
Egyptian EZDK has put March quotations for hot rolled coils for Middle East countries at the level of USD 585-590 per tone FOB. The majority of experts agree that while the Q1 of 2010 demand for flat steel in Middle East will be relatively low and even further hopes placed only on Turkey.
However, situation in the regional long product market is even more cheerless. By some estimates, rebar consumption in UAE in 2009 has reduced more than twice in comparison with the previous year, considerable recession is observed also in other countries of Gulf region, except Iraq only. The perspectives for the H1 of 2010 are rather unclear. Now it’s obvious that the governments of oil-producing countries are not going to open credits for large construction projects unless they will be sure in stability of international oil prices. These prices stayed merely all December at the mark of USD 70 which lets the countries to balance budgets but lefts merely no financial surplus.
During recent weeks the local prices for rebar in Middle East countries are relatively stable. In UAE local companies offer it for USD 490-500 per tonne delivered, in other countries which are large importers of rebar the prices are varying between USD 520-550 per tonne from a steel yard. However, Turkish companies have raised their local and export prices for rebar approximately by USD 10 per tonne.
At local market a middle sized material is offered for USD 480-490 per tonne EXW, quotations for foreign buyers reach USD 490-495 per tonne FOB. But the consumers consider these prices overrated, so there are few deals.
Turkish steelmakers are forced to hike prices first of all products by expensive scrap. The cost of US HMS1&2 material reaches USD 320-325 per tonne CFR, while purchases of European and Russian scrap are made mainly for USD 310-315 per tonne CFR, but everybody has no doubt in further coming price increase. Bad weather in Europe and North America led to significant reduction in scrap collecting and growth of its cost “on the ground. In USA the prices are expected to grow by USD 40 per tone in January, so exporters will try to increase their quotations to USD 350 per tonne CFR Turkey and over.
In the current situation it is practically unreal to make adequate increase in price for rebar. That is why Turkish companies reduce production. According to World Steel Association data, steel smelting in Turkey in November fell to 2.14 million tonnes against 2.28 million tonnes in October but December figure is likely to be even less than 2 million. Several companies reduced loading of capacities by 30% and more.
However, reduction in usage of expensive scrap means increasing in demand for billets. Due to that fact, the CIS suppliers have got an opportunity to increase quotations. Yet the cost of Russian and Ukrainian billets is held at the level of USD 415-420 per tonne FOB but some companies have succeeded to sign contracts for January for USD 430 per tonne FOB and over.

Source: Rusmet