Positive signs continue for flat rolled market
It has been a rocky year for the flat rolled market and traders who are heavily involved in it, but the worse is over and we can expect a somewhat less volatile market in 2006. This was the conclusion of Brad Decker of Man Ferrostaal, who discussed buying trends in the domestic steel industry at the AIIS Pacific Region Conference Tuesday.
Mr. Decker, sales manager of
coated and
stainless steels at a Long Beach branch of MAN Ferrostaal - a
trading,
distribution, and logistics company with 15 offices in
North America - gave the audience a focused look at trends in the domestic steel industry from a West Coast perspective.
In his presentation, he indicated that the domestic steel industry finished the year very strong compared to typical winters. The inventories are currently at a seven-year-low, with a 32 percent drop from peak levels in July. Domestic mills have taken advantage of these low inventories, allowing them to increase their prices rapidly and retain them at higher levels.
Mr. Decker was still concerned that West Coast flat rolled prices are the highest in the country, and are currently $40 /nt - $50 /nt, or 10 to 15 percent, higher than prices from domestic mills in other parts of the country.
He also discussed the impact of Chinese imports on the US market, pointing out that Chinese products have a direct and indirect impact on the West Coast, and he expects an increase in imports in the late first to early second quarters of 2006. New Chinese mills are still "popping out of the woodwork, but the good news is that hot rolled coils in
China are beginning to stabilize. When challenged by an attendee about this fact, he mentioned that Chinese mills must be very close to their cost of
production and that cost of
production is indeed a line on the sand," so prices should not drop further.
Another positive sign he sees is that prices are stable in Northern
Europe, while the price trend in the rest of
Europe and the
Middle East is still down. Trends in other major world markets will also impact the US market, as every part of the industry is interconnected.
Mr. Decker, also specialized in
stainless steel products, sees a turnaround for this market as well. As per
galvanized coils, zinc is now at an all-time high, which will affect
galvanized products, Mr. Decker asserted.
He concluded by sharing his vision of the cycles the steel industry goes through, concluding that the peaks and valleys which used to take place over years are now changing in a matter of months, as many in the industry react and sometimes overreact to the plethora of information we are now able to glean from the fast-paced world of instant communication.