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Chinese prices correct sharply: Chinese export HRC prices have
corrected sharply with prices falling below $700/MT FOB from as high as
$775-800/MT. CIS export prices have also corrected. Chinese domestic
HRC prices are down only 6% from peak levels of Feb and hence the
sharp export price decline (~10%) is puzzling. Exports in Feb were weak
with exports at the lowest level since Sept-09. While spot iron ore has also
corrected it is down only $20-25/MT from peak levels (implying a cost
reduction on a spot basis of ~$35/MT v/s steel price decline of $75-90/MT
(peak to now levels). While prices in Europe and US have moved up,
the sharp decline in China revives the scare of exports increasing out
from China (there is still an export tax in China on steel exports).
While Indian domestic prices were at a discount to global prices, the
sharp decline in Chinese exports prices means that domestic prices are
now at a premium. However, it remains to be seen, if the lower export
offers are for large volumes or smaller volumes by traders looking to exit.
It is clear that the upward domestic steel price momentum in HRC seems
to have come to an end for the time being (though given the price increases
in Jan and Feb means average June quarter steel prices in India would not
be down sharply q/q). Port inventories in China for iron ore remain high at
~83MT, while steel inventories (as per Bloomberg) at ~9MT are up 20%
m/m.
• Coking coal- No confirmation as of now: While there have been media
reports (Bloomberg) of a possible $330/MT settlement for the April-June
quarter, there has been no official confirmation on –a) price; b) duration of
the contract and c) whether it has been signed by all the sellers.
• ME crisis and impact on scrap prices: JPM UK steel analyst Alesandro
Abate in a detailed report on steel (European Steel 360#3- Temporary steel
price deceleration will favor shift from raw material cost push to demand
driven upcycle) highlights that Turkey is the world’s largest importer of
scrap (16.3MT in 2009) and the largest importer of US scrap. Turkey
exported (17.3MT) 60% of its domestic production of steel and of exports
61% was long steel products (with ME and North Africa accounting for
50% of long steel exports from Turkey). Alessandro highlights that the
uncertain political environment ‘has created a chain reaction' which among
other things for 'traders to get rid of scrap', Turkish steel mills to get rid of
finished goods stock and lastly end users to delay/cancel orders.The spread
between billets and HRC prices has increased to record levels of $200/MT
and such a premium is unsustainable which would need either billet prices
to increase of flat product prices to fall.
• Zinc inventories continue to increase and were up another 4% this
week to reach 0.73MT.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Chinese prices correct sharply: Chinese export HRC prices have
corrected sharply with prices falling below $700/MT FOB from as high as
$775-800/MT. CIS export prices have also corrected. Chinese domestic
HRC prices are down only 6% from peak levels of Feb and hence the
sharp export price decline (~10%) is puzzling. Exports in Feb were weak
with exports at the lowest level since Sept-09. While spot iron ore has also
corrected it is down only $20-25/MT from peak levels (implying a cost
reduction on a spot basis of ~$35/MT v/s steel price decline of $75-90/MT
(peak to now levels). While prices in Europe and US have moved up,
the sharp decline in China revives the scare of exports increasing out
from China (there is still an export tax in China on steel exports).
While Indian domestic prices were at a discount to global prices, the
sharp decline in Chinese exports prices means that domestic prices are
now at a premium. However, it remains to be seen, if the lower export
offers are for large volumes or smaller volumes by traders looking to exit.
It is clear that the upward domestic steel price momentum in HRC seems
to have come to an end for the time being (though given the price increases
in Jan and Feb means average June quarter steel prices in India would not
be down sharply q/q). Port inventories in China for iron ore remain high at
~83MT, while steel inventories (as per Bloomberg) at ~9MT are up 20%
m/m.
• Coking coal- No confirmation as of now: While there have been media
reports (Bloomberg) of a possible $330/MT settlement for the April-June
quarter, there has been no official confirmation on –a) price; b) duration of
the contract and c) whether it has been signed by all the sellers.
• ME crisis and impact on scrap prices: JPM UK steel analyst Alesandro
Abate in a detailed report on steel (European Steel 360#3- Temporary steel
price deceleration will favor shift from raw material cost push to demand
driven upcycle) highlights that Turkey is the world’s largest importer of
scrap (16.3MT in 2009) and the largest importer of US scrap. Turkey
exported (17.3MT) 60% of its domestic production of steel and of exports
61% was long steel products (with ME and North Africa accounting for
50% of long steel exports from Turkey). Alessandro highlights that the
uncertain political environment ‘has created a chain reaction' which among
other things for 'traders to get rid of scrap', Turkish steel mills to get rid of
finished goods stock and lastly end users to delay/cancel orders.The spread
between billets and HRC prices has increased to record levels of $200/MT
and such a premium is unsustainable which would need either billet prices
to increase of flat product prices to fall.
• Zinc inventories continue to increase and were up another 4% this
week to reach 0.73MT.
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