A quick overview of the global flat steel market
Current Market Conditions: Flat steel prices increase in most markets
After almost five months of the price hike, flat steel prices decreased through most of January in China. As the winter goes by, some of the end user demand cools down, but stocks at distribution centres are still high. Moreover, ahead of the upcoming Chinese New Year, starting from 15 February, there is quite muted trading activity. These two factors are together restraining domestic prices from any upward movement. As a result, Chinese prices moved in the opposite direction compared to other markets where flat steel prices have increased.
In Europe, the flat steel market started the year strongly, as demand (and prices) increased in January, with the German market leading the growth. Better performance in the automotive industry has boosted demand here. Indeed, new car registrations in the EU rose by 3.4% in 2017, compared to the previous year.
Flat steel prices are also increasing in India and expected to rise further over the next few weeks. One of the reasons behind high prices is the reduction of imports, which are currently at low levels, due to antidumping duties and Chinese New Year festival. New Lunar Year period also affects the demand for the flat steel in other parts of Asia, such as South Korea, Singapore, Malaysia and Taiwan.
In Russia, domestic demand is still weak due to a seasonal slowdown, though price hiked owing to the healthy demand for Russian materials abroad as the Chinese competition waned.
In Brazil, flat steelmakers managed to increase contractual prices with car producers (which accounted for around a third of flat steel demand), for instance, CSN achieved a 23% hike. At the same time, CSN, ArcelorMittal and Usiminas moved up their prices, between 13% and 23%, for the distribution sector as well.
Meanwhile, in the US, all eyes are turned to the Trump administration, as the U.S. Commerce Department submitted its results to President Trump regarding its probe into whether steel imports threaten the US national security. Mr Trump has now 90 days to decide on any action. In anticipation of trade restrictions, steel imports surged. Until November 2017, they were up by 18%, compared with 2016, according to the American Iron and Steel Institute.
Outlook: Steel demand to cool down in China and remains robust in Europe
Chinese demand for flat steel in the short term is going to slow down further, dragging prices down. However, we do not expect that Chinese steelmakers turn to the export market massively, as the overall activity slows down, with mills also reducing output or doing planned closures for maintenance.
Commodity Insides expects that the German flat steel prices to continue on an ascending trajectory in February, driven by the healthily automotive industry. HDG prices are expected to grow even faster, due to protectionist measures, better demand fundamentals and rising zinc costs.
In India, steel demand in the white good sector is going to remain flat, until the new government budget is announced. It is expected that some relaxations for the sector are likely to be announced, which will support demand. Similarly, automotive performance is to pick up the pace from March onwards, when the major OEMs are going to launch their new models.
Russian companies will see some downside risks going forward. Once Chinese production returns to normal levels, after the winter, Russian materials would face stiff competition in international market. Moreover, the strengthening of the Russian Rouble will also hike exports prices and make harder for producers to compete abroad.
Brazilian imports of HRC are expected to increase, as Brazilian government decided not to impose anti-dumping on HRC from Russia and China. Meanwhile, imports of galvanised and galvalume will be high this year, as the local production is not going to be enough for the increasing demand.
This is excerpts from our January issue of Flat Steel Insider. To find out more about our service please click here