June 2012 Demand weak and prices falling or under pressure, but production continues above last year’s levels
The Eurozone crisis continues, with piece‐meal solutions in Greece and Ireland being followed by a bail‐ out for Spanish banks in early June. These actions do not appear likely to solve the problem permanently, while politicians and commentators around the world are citing weak economic growth in Europe as a concern for their own regions. Thus business confidence throughout Europe is still poor and is likely to remain so for some months, but China and US are increasingly affected. The euro has weakened sharply against the dollar after remaining at higher levels since the new year. This has recently cut the level of imports into Europe and is enabling exports from European producers to increase in some cases. However, the economic situation in some other regions is better. In North America, economic data and leading indicators have been more positive, with unemployment falling, and there are still hopes that this election year will bring its usual good news for the US economy. This would fit with a boost in the second half of the year, but some sectors such as automotive and energy are already doing better than other steel‐using segments. Economic growth in Asia is steady although the power‐houses of China and India are showing slower growth than predicted for steel demand. Demand has held up for Q2, but sentiment is still cautious and the third quarter is usually weaker. The Chinese economy has grown at a more modest rate in the first half, but an interest rate cut in early June and anticipation that government spending has been held back for the second half is giving some cause for optimism. Steel demand is less strong than a year ago, but output is slightly higher year‐on‐year. Some sectors, especially construction, still have some improvement to make. Drawdown of Chinese inventories has been slower than at this time last year, so stock levels are higher than preferred. In US, flat products prices appear likely to continue slipping downwards as an attempt at increases by some producers was short‐lived. In Europe, spot flats prices could keep Con nued on Page 2
Global Overview Pg 4
Coil Regional Review Pg 6
Long Product Review Pg 7
Plate Review Pg 8
Scrap Review Pg 8
Global Overview of Production Pg 9
The key question is will producers be driven to cut production levels if they are loss‐making between now and Au‐ gust or September, when the drop in actual demand over the summer may begin to be reversed.
WEAK DEMAND FOR FLATS IN US WILL LEAD TO STEADILY FALLING PRICES IN JUNE AND EARLY IN Q3, WHILE EUROPEAN PRIC‐ ES COULD ALSO SLIP UNLESS SUPPLY‐DEMAND BALANCE IMPROVES. COIL PRICES IN ASIA ARE LIKELY TO WEAKEN SLOWLY. LONG PRODUCTS’ PRICES ARE LIKELY TO DROP IN Q3 IN EUROPE AND US, IF SCRAP PRICING FALLS AND AFFECTS SENTIMENT. ASIAN LONGS LEVELS COULD ALSO SLIP. SCRAP PRICES ARE LIKELY TO CONTINUE TO FALL BEFORE FINDING A NEW, STABLE PRICE LEVEL FOR Q3.
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Steel Price Outlook Expectations in May (For Next 3 Months) 66% Decrease
55% 47%
JSW Group’s
26% No Change
33% 17%
Seshagiri Rao
North America
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Europe
8% Increase
Asia & Middle East
12%
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36% 0%
10%
Source: The Steel Index
20%
30%
40%
50%
60%
70%
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© Copyright The Steel Index 2012
Copyright © 2012 by Platts, The McGraw-Hill Companies, Inc.
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