Modest steel price recovery in many developing countries but it may not last

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

31 Oct 2010

In the Russian Federation, metallurgical plants have adopted controversial pricing positions for October. End-users and traders have questioned whether the new, increased prices are supported by market and economic fundamentals. Traditionally, prior to the end of the construction season, long product selling figures are either held at September levels or lowered. Observers are now forecasting that Russian mills may find it difficult to fill their capacities in the remainder of 2010.
The general outlook for the Ukrainian steel industry has not improved. Domestic producers are increasingly finding it difficult to run day to day operations. Bankruptcy proceedings have been opened against JSC Makeevskya Metallurgical Plant. Production and JSC Donetsktal Metallurgical Plant is under threat. The company has failed to reach a price agreement with Metinvest for iron ore deliveries.
Difficult trading conditions have persisted in Turkey. Long product mills have attempted to reverse the downward trend in their domestic and export prices. No further cuts are expected in the interim. Producers do not believe lower offers will facilitate sales. Buyers are waiting for evidence of price stability. In the meantime, they are observing the developments within the ferrous scrap and billet markets. Flat product steelmakers are facing similar pressures. Ex-works prices have been reduced to stimulate buyer interest.
Indian steelmakers have experienced mixed fortunes in October, since ex-works basis quotations were lifted by Rs500/1,500 per tonne. Sales volumes of flat products have slowed. The decision to lift coil prices may have only encouraged importers. Demand was expected to rebound during the festival periods. Producers have acknowledged that it may be difficult for future price adjustments to be dictated only by raw material costs.
Purchasing activity in the United Arab Emirates is unlikely to recover for some time. The distributor chain is in no rush to take delivery of new steel. Inventories are sufficient to meet current requirements. Construction activity is very low. A few dealers are considering re-exporting material to other destinations within the GCC region. Local re-rollers are now selling their steel products on pre-payment terms. Several traders have folded in 2010 and have left behind significant debts. The recent volatility in billet costs has forced the steelmakers to review their capacity utilisation rates.
Sentiment in the South Africa has remained subdued in October. Market participants are not forecasting increases in ex-works offers in the fourth quarter. However, any downward adjustment will be minor, as ArcelorMittal South Africa and Highveld are already operating on small margins. Distributors have been reviewing their pricing strategies. Most are finding it difficult to manage their inventories due to sporadic low order patterens.
Brazilian producers have publically stated that they remain focused on stemming the flow of imported steel. However, foreign supplies are now an intrinsic part of the local steel market. To succeed it would require an overhaul of the steelmakers pricing strategies. There are growing concerns that the market is oversupplied. Inventories at the distributors are high.
The outlook for the Mexican steel industry is unclear. Domestic steelmakers have issued higher steel product prices in October. These adjustments were driven by expectations of stronger market conditions in the fourth quarter. It is far from certain that sales volumes will rebound. End-user sales may rise but distributor trade will remain flat as their inventory levels have grown steadily. Shipments to the construction and infrastructure sectors have continued to be hampered by a lack of investment.

Source: MEPS