The UK-based research group, MEPS, says there is still downward pressure on US steel transaction prices, although the rate of decrease has decelerated. Mill outages continue, with operating levels quoted at between 40% and 50%, depending on the facility. MEPS said that “Deliveries are running late because of the production constraints. Nevertheless, distributors are keeping inventories at the lowest levels in many years as they react to the sharp decline in end user steel demand caused by the economic recession.”
It added that "The Canadian market remains depressed due to auto production cuts and weak construction activity. New order intake at the steelmakers continues to be slow, with no improvement from the poor levels of late 2008. Both service centers and consumers are working with such reduced inventories that they have to request rapid deliveries when they do purchase from the mills. Distributors’ volumes are low and profitability is declining. Although some imports are available at figures below domestic ones, customers are loathe commit to offshore business."
MEPS said that “The Chinese steel market responded quite positively to the government’s economic stimulus package and to the plans to revive auto, shipbuilding and machinery manufacture. These are expected to grow demand during the first half of 2009. However, the upward price tendency experienced over the last two to three months appears unsustainable for now. Domestic values rose in the first few trading days following the Chinese New Year holidays but have turned down since then. Steel exports continue to contract and overseas sales of manufactured goods are also declining due to the global economic crisis.”
MEPS added that "The Japanese mills are deepening their output curbs in the face of rapidly shrinking sales. They state that their prime task now is to reduce stock levels. Inventories of strip mill products held by local steelmakers and distributors, as end December, moved up by 3.1% as compared to November to the highest level ever recorded. Meanwhile, quayside stocks of imported flat products rose by 2% in the same time frame, the first increase since October 2008. Tokyo Steel decided to cut domestic list prices for all its products by between JPY 3000 and JPY 10,000 per tonne for March contracts. POSCO has extended its steel production cutbacks into this month due to weakening market conditions and the need to adjust stock levels. Flat product inventories at distributors climbed by 4% between November 2008 and the end of the year, reflecting dismal demand in the auto and appliance sectors. They stabilized during January."
MEPS further added that "The global crisis is impacting Poland. Strip mill demand is very limited at present with no significant mill bookings to speak of, thus causing suppliers to offer further price reductions. In the Czech and Slovak markets, the steel sector is expected to perform badly as long as the current economic squeeze persists. Those producers linked to the auto industry are likely to suffer the most. Mill prices may be at the bottom now and are expected to stay at this low level until mid year. Any recovery in the second half is expected to be small. Resale values are under considerable pressure as distributors fight for the few deals available, desperate to sell their high priced stock.”
It concluded that “In Western Europe, market sentiment is depressed. The slightly more positive attitude witnessed at the start of 2009 evaporated a month later. Producers failed to achieve the first quarter price rises they were seeking, due to continuing weak demand and a lack of any desire on the part of customers to order ahead."
Source: Steel Guru
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