Rising Input Costs Push Global Price Upwards in February

US customers are cautiously optimistic that consumption will grow for seasonal reasons in the spring. At present, the supply/demand balance for strip mill products is relatively tight, with steelmakers quoting May deliveries. The availability situation could change quite quickly, however, as several previously idled blast furnaces are set to come back on stream. We can report that the latest business has been settled at substantially higher transaction values than in January. Input expenditure has been a big factor in pricing recently as ferrous scrap, iron ore, coking coal and energy costs have all showed increases. Overseas offerings continue to be very scarce.

Canadian mills report that order intake is good. They are essentially booked out for March, with April filling up quickly. Transaction figures continue to climb on a monthly basis and further movement is considered likely. The rises are cost based as producers see their raw material outlay escalate. Service centers state that import offers are minimal at present. Their inventory positions are comfortable but sales activity is inconsistent.

Following some previous weakness, Chinese domestic prices have stabilized, with many traders and customers out of the market for the long New Year holidays. Just prior to the break, Baosteel said it would raise its March ex-works values. The hike is supported by excellent demand from auto and electrical appliance makers. However, bloated inventories remain a cause for concern. Market players believe the government may intervene by tightening lending to traders.

Overall demand is fairly stable in Japan, driven by auto and export sales, although construction industry consumption remains sluggish. Higher scrap outlay, plus the anticipated growing costs of iron ore and coking coal, are now pushing market prices in a positive direction. Meanwhile, quayside stocks of imported flat products, as end December, were at similar levels to the previous month. Buyers are wary of purchasing large volumes from overseas.

Growing demand in South Korea from the vehicle and home appliance sectors is expected to be underpinned by continued government stimulus measures. Further inventory adjustment at the distributors is necessary. Domestic steel prices continue to strengthen in Taiwan where mill order intake is described as "buoyant".

Strip mill product values failed to move up in Poland over the last month. Producers would like to apply a ˆ20/40 per tonne rise for the second quarter but some customer resistance is envisaged. Although a degree of restocking took place during January, underlying consumption remains muted.

We have noted a number of new developments in the Czech/Slovak market, all of which have resulted from very firm mill pricing policies. Producers have further restricted supply because they are determined to claw back some of the significantly higher costs they are incurring. However, this initiative is not supported by demand and customers debate whether the present levels can be sustained for any length of time. Profit margins at the service centers are being squeezed even tighter.

In Western Europe, first quarter strip mill product business is virtually finished now and spot prices have moved up in many instances. They are expected to rise further in period two if the mills' plans prove successful. Most producers have not quantified their proposals, so far. Although stocks are low throughout the supply chain, end-user consumption has failed to recover. Consequently, buyers are very cautious. Distributors, in particular, question whether they will be able to recoup the increases from their customers.

Monday, March 1, 2010
Ferrous metals,  Common
Source: MEPS