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Most markets remain very soft, prices fluctuate near costs - 27 July 2012

Global steel markets remained very soft last week, reflecting continuing high levels of crude production, the depressed economic outlook and poor sentiment. US coil prices, plus a few others, showed some life, but most declined.

First half 2012 crude steel output at 767m tonnes was 0.9% up on H1 2011, World Steel Association figures indicate, with increases in Asia and North America more than offsetting decreases in Europe and South America.

Until mills cut their production prices will continue to fluctuate around cost levels, believes Roger Manser of Kestrelman, a steel economics consultancy. Assuming this year’s world apparent steel use is similar to last year, second half crude production would need to be lower by at least 50m tonnes, and possibly by 100m t compared with H1 2012, depending on other assumptions, he estimates. Around half of this will need to occur in China.

China’s state-owned steel mills, however, were maintaining high output levels to safeguard local employment. This was despite HRC prices falling to RMB 3,750-3,900/t ($594-618/t) with VAT, and $508-528/t without. Shanghai rebar futures too fell by about 3% last week. Construction remains lacklustre, although with signs that housing prices are bottoming. Some expect a second half rise in demand.

62% Fe iron ore prices fell almost 6% last week to $125/dmt cfr north China on lack of buying and too many offers, The Steel Index suggests. Also, most scrap prices slipped a little.

Elsewhere billet and rebar prices weakened with cheaper scrap and proliferating low offers. CIS billet fell to around $540/t fob Black Sea, with competitive offers from Turkey and the EU. Turkish rebar offers of $615-620/t fob were reportedly challenged by the Italians at €490/t ($600/t) fob, and the Spaniards at €470/t ($576/t) fob. North American rebar prices were cut by $20-30/s.t to around $625-635/s.t, fob southeastern US mill.

North European HRC market prices fell back to the levels of several weeks ago, though a few producer prices were still being held at around €520/t ($632/t) ex-works. South European prices declined to €485-515/t ($589-626/t) ex-works.

In the USA, potential work stoppages, planned blast furnace outages and a likely uptick in August scrap prices have left some US sheet buyers anticipating rising prices. Spot HRC has risen $20/s.t to $605-620/s.t ($667-684/t) Midwest ex-works, since mills announced $40/s.t price hikes earlier this month.

This market report was taken from the 25 July edition of SBB's World Steel Review.


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