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| Pervasive Slack In Asian Steel Market Conditions |
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There are enhanced signs of a pervasive slack in steel market conditions across Asia. Major steelmakers in nations such as Japan, South Korea and China are scheduled to resume their steel export negotiations next week on November-December shipments after China's 60th anniversary (Oct 1) of its foundation and the subsequent holidays (Oct 2-8). But their requests for price increases could suffer a setback because various customers are alike taking a wait-and-see position. It is a domestic price policy of China's Baosteel Co that accounts for part of slack market conditions in Asia as a whole. There is strong speculation that Baosteel will reduce its sales prices of various steel products for November shipments. The company's domestic price terms of November shipments are expected to become clear early next week. As to HR coils, Baosteel has a domestic price reduction in effect of Yn200/ton (US$30) for October shipments. In effect for October shipments, too, are HR coil price reductions of Yn400/ton (US$59) by Wuhan Iron & Steel Group Corp (Wisco) and Yn450/ton (US$66) by Anshan Iron & Steel Group Corp (Ansteel). But China's domestic market prices have continued to fall week after week since September, largely for sheet products. Therefore, there is a considerable spread between the going market prices and what various steelmakers charge for their sales. In this connection, there are forecasts that Baosteel will execute larger price reductions of various steel products for November than the ones for October shipments, thereby correcting what differs from the going market prices. It is understood that more steel production from local steel mills than demand is under way besides a pronounced increase in stocks of steel products, factors behind a continued fall in China's domestic market prices of steel products. China's definite iron and steel production for September is expected to become clear at the end of this week or early next week, production volumes that are forecast to exceed what turned out in August when crude steel production totaled 52,330,000 tons. Major integrated steelmakers such as Baosteel and Wisco are said to be holding down their production levels to what they actually put out last year. But there are signs of small and midsize steelmakers favoring a continued major increase in their production. With steel market prices on the downside at home, China's steelmakers are reacting with marked moves to promote exports of what they produce, moves that are intended to meet higher prices in export markets than domestic sales. They offered low prices to the rest of East Asia, Southeast Asia or to the Middle East before China's 60th anniversary of its foundation. The offer prices were said to be lower by US$20-30/ton than what existed as established transaction prices then. For their part, various customers have taken a wait-and-see position altogether in expectation of lower price offers from the Chinese steelmakers after the China's 60th anniversary of its foundation and the subsequent holidays. As to HR coils, there are reports of Chinese offers to Southeast Asia even at prices below US$500/ton FOB. Meanwhile, Japan's integrated steelmakers are concerned about what may affect their HR coil exports under contract for October-December shipments to South Korea, with the price of close to US$600/ton FOB for December shipments. By comparison, China's major steelmakers are said to have negotiated their HR coil exports to South Korea at around US$550/ton FOB for October-December shipments. South Korea's major customer, though, is holding back from working out an agreement so far in its HR coil imports under negotiation with the Japanese steelmakers. In this connection, the Japanese steelmakers may end up facing various Korean users' requests for price renegotiations on the existing supply contracts of HR coils if China's small and midsize steelmakers offer lower HR coil prices to South Korea than the negotiated Japanese prices by nearly US$100/ton, market sources forecast. |
| last modified : Tue 13 Oct, 2009 [11:23] |
