Commodities | Apr 21 2006
Steel prices continue to strengthen as the Northern Hemisphere moves from winter to spring, but traditionally the gains in prices made in this season don’t last through the summer.
Industry consultant MEPS suggests this year may prove an exception though, as conditions in European markets are improving and the mills appear to be in the driving seat in terms of the sustainability of price rises.
Helping is an increase in consumption, MEPS noting the key markets of Germany and Italy have experienced stronger than expected demand, while only France currently appears to be a weak market.
Also helping is producer discipline, with MEPS pointing out the mills are focusing on avoiding a repeat of the last cycle when overstocking by customers led to a collapse in prices. To achieve this they are delaying deliveries, with industry reports suggesting some deliveries for new contracts are being put off until September.
Similar discipline is in evidence in the Japanese market, with Nikko Citigroup noting Tokyo Steel has announced its production levels will remain 20% below those of the October to December period so current stockpiles can be run-down.
This is allowing the company to lift prices for its products, the broker noting it has increased the contract price for hot rolled coil for May delivery.
MEPS points to similar increases in the European market, with flat prices rising by an average of 15 euros per tonne between March and April. The expectations is for further rises through the course of coming months, MEPS suggesting uncoated coil may increase by 10-30 euros per tonne, while hot-dip galvanised coil could enjoy gains of 60-80 euros per tonne.
All this could be good news for Australia’s steel producers, who must be hoping the better industry outlook spreads to their markets as higher steel prices would provide a boost for margins that are being pressured by rising costs.