Mid-January world steel market recap
While prices in the steel market as a whole continue to rise, the market for semi-finished products remains relatively unaffected. Weak demand, especially in East Asia, is one of the main reasons semi-finished material prices remain stagnant. The expected increase in the cost of raw materials might entice some companies to purchase semi-finished material rather than produce steel for themselves. However, whether this would cause a sharp rise in the price of semi-finished remains in doubt as China currently has a significant steel surplus. Traders in the CIS quote prices between $330-360 for semi-finished product, while Chinese exporters maintain prices around $370-380. Prices of steel slabs originating from the CIS remain unchanged at $475-500 FOB. Producers of structural steel in the West are clearly hoping for an increase in prices in February-March, when the construction sector is expected to pick up from the winter off season. However, taking into consideration the current stagnation in Western Europe and the weakening dollar, demand will likely remain moderate this year. Prices for average quality hot-rolled coils experienced no movement for the past six weeks due to a combination of moderate demand and stiff competition from Chinese exporters. On the other hand, the current market situation for high quality thin and thick plates production strongly favors suppliers. Demand for high quality steel in the automotive and household appliance sectors has prompted companies like China Steel to increase prices by as much as $40/t. Hot-rolled coils from China Steel sell for around $600/t, while cold-rolled fetch nearly $700/t. Stainless steel prices in Europe and East Asia remain stable due to low production demand. The US market on the other hand experienced price increases of 6-12% in the stainless and specialized steel market. American producers cited both an increase in demand and an increase in the cost of raw material as the reason behind the price rise. The latter is particularly important: Even though nickel prices are on the downturn -prices peaked at a 14-year high last January of $17184/t, but averaged only $13741/t for 2004 as a whole- prices for other alloying materials like titanium, vanadium, molybdenum, tungsten and chromium continue to increase. Until recently, integrated mills retained the favorable position in the market place because of the lower cost of iron ore compared to scrap metal; however, the tables have turned. Mini-mills are finding themselves in an enviable position as prices for iron ore continue to shoot upwards while scrap metal prices, with the exception of East Asia, generally remain stable. Low demand for scrap, a saturated market, and the wide selection of cheap semi finished products continues to depress scrap metal prices in East Asia. In Europe, producers are expected to increase their scrap acquisition in February, which in turn will reduce the regional market surplus.