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MEPS PREDICTS EU STEEL PRICE UPTURN IN SEPTEMBER

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MEPS PREDICTS EU STEEL PRICE UPTURN IN SEPTEMBER

MEPS PREDICTS EU STEEL PRICE UPTURN IN SEPTEMBER

The MEPS EU all products composite steel price, in July, stood at €50 per tonne below its April peak but €44 per tonne above the corresponding figure in July 2016. Contrasting fortunes were witnessed for the two major product categories. Last month, the MEPS EU flat product composite price increased by €77 per tonne, year-on-year, whereas that for long products fell by €6 per tonne, during the same period. A number of factors can be noted behind this divergent trend.

A key driver for the upturn in flat product selling figures was increased costs for blast furnace steelmakers. Coking coal prices surged in September-November 2016, following enforced output cuts at Chinese mines and supply problems at a number of facilities worldwide. Values spiked again, in April 2017, as a result of damage to transportation routes in Australia in the aftermath of Cyclone Debbie.

With the exception of a dip in the second quarter of this year, iron ore prices have been strong, surpassing many observers’ previous predictions. High Chinese crude steel demand supported mill input prices, despite plentiful supply, following recent mine expansions. In addition to the rises in steelmaking raw material costs, coated coil transaction figures received a boost from strong zinc selling values.

Ferrous scrap costs, a significant influence on long product prices, also increased, during the past twelve months. However, the gains were not as noticeable as those for coking coal and, to a lesser extent, iron ore, used in the manufacture of flat products.

The supply/demand balance was much tighter for flat products in comparison with long products, during the past year. The automotive sector was a standout performer across the major steel end-user segments, boosting demand for cold rolled and galvanised coil. Previous temporary closures and production problems at a number of local mills resulted in extended delivery lead times and, therefore, upward price pressure.

The construction industry, the main consumer of long products, has recorded only gradual improvement. Supply of bars, rods and beams was plentiful, with strong competition between domestic mills. Furthermore, producers, particularly in southern Europe, were adversely affected by a downturn in export demand from overseas customers.

In the flat product segment, import prices have a significant influence on EU domestic price trends. A number of trade defence measures were implemented during past twelve months. However, volumes from overseas fell by a modest amount, as local buyers continued to secure offshore supplies due to the restricted domestic availability. Nonetheless, with the exception of a downturn in the second quarter, import prices climbed sharply.

Transaction values for both flat and long products are forecast to rise when business resumes, following the summer holiday period. Globally, steel selling figures increased markedly in recent months, led by the uptrend in China. Furthermore, mill input expenditure is escalating.

A lack of competitively priced import offers should enable European flat product steelmakers to secure rises, in the short term. Moreover, bullish sentiment in China is driving up spot prices for coking coal and iron ore. As a consequence, transaction values for hot rolled plate are expected to follow the uptrend in coil, supported by elevated slab costs.

Following the small upturn in early July, the rebound in European long product prices should accelerate markedly, in September. Mills are making concerted efforts to lift their selling figures, after the substantial erosion in profit margins, during the past twelve months. Sentiment has improved since the return of the key Algerian export market. A sharp downturn is developing in the volume of Chinese steel exports for rebar and billet, due to government mandated capacity closures and better-than-expected domestic demand. This has resulted in substantial rises in billet and scrap prices, worldwide. Furthermore, along with elevated scrap costs, mill expenditure for electrodes and ferro-alloys is rising.

MEPS predicts a seasonal softening in prices for both long and flats products, in the fourth quarter of the year. However, a portion of the gains secured in September should be retained.

 

Pub Time : 2017-10-11 15:49:40 >> News list
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