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Suppliers face weaker markets, economic uncertainty goes on - 20 April 2012

Last week’s steel markets in northern Europe and North America showed some signs of weakness and probably continue to lack the strength to support any new Q2 price increases. Though benchmark HRC prices did not fall in either region, they were down a little in southern Europe, with mills doing much of their business towards the bottom of their ex-works ranges. It still remains unclear whether demand will be sufficient to maintain these existing strip prices or whether they will slowly fall during the next few months.

In China and East Asia, strip prices too were mostly unchanged last week. The HRC import market in Southeast Asia remained quiet. Offer prices for Chinese commercial quality HRC were unchanged at $670-680/t cfr SE Asia, with regional importers generally bidding at $650-660/t cfr.

In Q1, China’s GDP grew 8.1% while crude steel production rose 2.4% to just under 700mt annualized. However, apparent consumption over the same period rose by less than 1%, with some analysts, such as Macquarie, suggesting that real consumption fell year-on-year. It believes Q1 was the bottom of the Chinese cycle, and that demand should pick up with a rise in the number of property transactions and in lending.

Spot Chinese iron ore prices indeed rose last week, with the IODEX 62% Fe touching $151.25/dmt. However, the settlement prices for October rebar and June HRC were essentially unchanged over the five working days to 13 April: the local steel industry remained cautious. Baosteel recently decided to keep most of its official prices unchanged for May, though it says it is removing discounts.

Doubts continued to plague the euro zone, though it would appear that the worst is over. Domestic German rebar prices declined by around €10/t ($13/t) last week to €540-550/t del. Soft demand, reflecting the uncertainty about the European economic outlook, and the exchange rate also weighed on the market.

US general economic confidence weakened a little. Traders say they were able to negotiate on hot rolled sheet with most mills. Moreover Nucor announced rebar transaction prices would stay flat for May’s US shipments, mirroring its plans for wide-flange beams and merchant bars. In a letter to customers, Nucor said it would raise rebar base prices by $10/s.t, offsetting the $10/s.t drop in the monthly scrap surcharge.

This market report is taken from the 18 April edition of SBB’s World Steel Review.


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