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International Steel roundup
February 2004
The pace of change in the US has been rapid over recent weeks. Due to unprecedented increases in raw material costs, suppliers have implemented surcharges ranging from $15 to $40 per tonne on all steel shipments, effective throughout January.
These are on top of higher basis prices. In addition to these spiralling prices, customers are now concerned about availability. There is a shortage of coke which is constraining production at some mills and they are already saying that first quarter orders will spill over to April at least. Spot buyers are particularly hard hit because their traditional method of shopping around is now working against them as the producers start to put their most loyal customers first. Offshore offers are still limited. High ocean freight rates and the low value of the dollar are discouraging importers.
Demand from Japanese carmakers and construction machinery manufacturers remain good and export enquiries are holding up. Local inventories of strip products, at end November 2003, fell by 2.6 percent compared with the previous month. However, quayside warehouse stocks of imported flat products increased by 1.0 percent from October.
In South Korea, domestic demand is strong with auto production and shipbuilding especially active. Prices are on an upward trend. Posco has just announced a uniform hike of WON 50,000 per tonne across the strip mill product range.
Taiwanese business is brisk. Seriously tight supply is causing some panic buying as customers try to build up their inventories. We have recorded significant price advances. China's appetite for steel continues to ensure that Taiwanese steelmakers remain busy.
EU prices for all flat products have risen as a result of higher procurement charges for coal, scrap, freight and energy as well as some restocking by distributors and end users. Several European mills are already planning further price increases in the second quarter.
The Polish economic climate continues to improve. The mills are expecting better demand during 2004. In Slovakia and the Czech Republic most prices are stable this month, in spite of rising input costs. However, small improvements are anticipated during the first quarter. Production continues at a good level with strong domestic and export order books. Inventories are in line with consumption. The economic outlook for both countries is optimistic. Imports are not problematic. Competition from Russia and Ukraine has receded as those suppliers compete in more lucrative markets.
LONG PRODUCTS
US long product mills have been hard hit by the surge in scrap costs. This has led not only to higher basis prices but has caused producers to introduce surcharges as well. Demand has improved as customers restock. Imports have little influence on the market.
The relentless climb in Japanese ferrous scrap charges combined with production cuts continue to push up long product prices even though sales to the construction sector are likely to fall during the first quarter due to seasonal factors.
South Korean investment in construction is forecast to decrease during 2004. Consequently, demand has turned downwards, albeit from a high point. In contrast, price movements are positive because of escalating input costs. Activity in the Taiwanese building market has failed to rally. However, following a considerable increase in costs over recent months, prices for long products have moved sharply higher over the last few weeks. With raw materials in short supply, many mills have been forced to reduce output.
Rapid price developments are taking place in the EU where long product availability is also restricted. There are very few offers from Eastern Europe or Turkey. Producers in most European countries have persuaded buyers to accept higher basis prices or surcharges to, at least, partially offset their heavy input costs.
For the moment, seasonal influences have not undermined long product prices in Poland, perhaps because they are already so low. The improvement in the economy should create a more encouraging environment for consumption in the Spring. The Czech building industry continues to grow apace. Steel demand has held up, despite the onset of Winter.
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