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Market sentiment improves, some prices turn upwards - 2 March 2012

Although global market sentiment is now improving, last week’s trading volumes were still low in China and many other parts of East Asia, and declined in North America. Internationally, scrap and iron ore prices have picked up and this, together with a resolution (for now) of the Greek debt issue, has helped reduce uncertainty and is assisting producers in raising prices in many regions. This upward trend is expected to become more widespread, outside of North America, in the coming weeks.

In Southeast Asia, buying activity for commercial quality HRC was still sluggish last week due to the continuing lacklustre perception of the global economy. However, some Chinese and other coil producers have begun to raise export offer prices, the former looking to export commodity grade HRC to the region at $630/tonne fob.

There were also other signs that the regional market was bottoming out. Taiwan’s China Steel Corp (CSC) lifted its April-May domestic prices of most products by $1-17/t in anticipation of an improved world economy. Its price for April-May for SPHC-grade HRC is calculated by Steel Business Briefing at TWD 21,713/t ($735/t).

In addition, strip demand within China has begun to firm a little, reflecting an anticipated seasonal improvement in end-user demand during March and April, the recent cut in the banks’ reserve requirement ratio and the minimal rise in inventories. The May rebar price on the Shanghai Futures Exchange also rose last week by about $8/t, but construction demand remained shaky.

In Europe, producers’ move to raise coil prices slowly is so far paying off. Spot HRC prices in northern Europe were around €540-550/t ex-works last week; southern European prices are lower, with mills apparently offering discounts. Although production from a number of EU plants continued to be restricted, crude production rose month-on-month in January, but was down on October and November levels. Plentiful supplies of EU scrap depressed its price and those of some long products, but this was not expected to last too long.

In contrast, North American strip mill lead times fell last week, according to The Steel Index. The shortening lead times came as domestic spot pricing also trended downwards: HRC fell $10-30/s.t to roughly $700-720/s.ton ($772-794/t), with further falls expected. US January crude production was up 3.6% m-o-m, and 5.7% y-o-y, whilst imports rose 23% m-o-m and 20% y-o-y. Some of the strongest increases in imports were in rebar, cut plate and OCTG.

This market report was taken from the 29 February issue of SBB's World Steel Review.


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