Commodities | Nov 26 2008
By Chris Shaw
The November summary of global steel markets is not a pretty picture and industry consultant MEPS has completed its review by cutting its estimated global steel price by 15%.
Conditions are particularly weak in the US, where the group notes demand has been so weak mills are only producing at around 65% capacity. This is well down from levels of 91% in August. Business for service centres has also slowed significantly and their stockpiles of high priced material have forced sales at low prices, while steelmakers have cut production and taken out blast furnaces.
The domestic players in the US are likely to do it even tougher in coming months. The stronger US dollar has made that market more attractive to imports to the extent that tonnage of such material is likely to increase early in 2009.
The story is similar in Canada and MEPS notes the slow market means a number of producers are likely to extend the traditional December/January production shutdown period. This reflects the fact customers are putting off buying until it is absolutely necessary. Transaction values are not being helped by falling scrap metal prices either.
Flat product prices in China continue to fall on the back of the global financial crisis and falling raw material costs. This combination is causing further cuts to production at domestic mills. At the same time, downstream industries are shrinking as exports of finished goods are declining.
Japanese steelmakers are also lowering production slightly despite imports increasing on the back of the stronger yen. The higher stockpiles mean prices are continuing to come down. Weaker demand in South Korea has also meant downstream purchasers are delaying buying where possible, while distributors have run down stocks to such a level there are shortfalls in certain products.
Steel demand in Western Europe has collapsed and this means prices are difficult to justify given the general lack of buy orders. The fall in demand means existing supply should be enough to meet demand for weeks or even months, making the recently announced production cuts necessary to lower costs in the face of negative pricing pressures.
Sales are also weakening in Eastern Europe, as stocks grow and buyers are tentative. MEPS reports the second quarter of 2009 is now being quoted by some industry players as the earliest the current situation is likely to be corrected.