SBB GMO 02/12

February 2012

Q2 prices should increase slightly, but currency movements and imports may prove crucial The Eurozone crisis has con nued into 2012, which will aﬀect business confidence for months to come. Eurofer is predic ng a 2% year‐on‐year decline in apparent demand in EU‐27 for 2012, while CISA has expressed fears that such weakness will impact on China’s steel industry. However, the Euro is strengthening against the dollar since mid‐January, a er weakening sharply around the new year. This could have an impact on levels of exports and imports into Europe in the next six months, as imports have been very low for some months. Other economic problems around the world have also con nued, but the picture in North America has been more posi ve since Q4 last year. This is also an elec on year, which is typically good news for the US economy. Steel and raw materials markets globally have been moving upwards recently, though the first‐mover, North America, is already pausing a er strong increases in the past two months and scrap prices are now weaker. Demand in US should be stronger a er the next two or three months, but may not con nue to be as firm in Europe in Q2. First indica ons for demand in Asia a er Chinese New Year are encouraging, but it is unclear whether this will con nue un l mid‐summer. Worldwide, concerns about the financial situa on mean that many buyers will not want to make commitments very far forward. However, this means that apparent consump on and stock levels are at realis c levels as buyers have generally been more cau ous than a year ago, when they over‐stocked early in 2011. Produc on rates have fallen in December, though not in US, while Chinese output grew slightly. Scrap prices are falling a er remaining firm into the new year, while iron ore is slowly increasing as Chinese buyers return cau ously. Ore price levels are likely to increase slowly in the next few

Global Overview Pg 4

Coil Regional Review Pg 6

Long Product Review Pg 7

Plate Review Pg 7

Scrap Review

Pg 8

Global Overview of Production Pg 9

Con nued on Page 2 

The key question is whether demand and production can be matched during Q1 so that sentiment for higher prices will be positive going into the second quarter. STEADY DEMAND FOR FLATS IN EUROPE MEANS RISING PRICES DURING Q1, WHILE US PRICES SHOULD BE STABLE AS DEMAND EASES. COIL PRICES IN ASIA SHOULD IMPROVE SLOWLY UNLESS DEMAND FAILS TO IMPROVE. LONG PRODUCTS’ PRICES ARE LIKELY TO INCREASE IN Q1 IN EUROPE AND US, UNLESS FALLING SCRAP PRICING LEADS TO WEAKER SENTIMENT. ASIAN LONGS LEVELS SHOULD ALSO GAIN UNLESS SCRAP PRICES DROP.

GMO Video

Market Sen ment Survey

Watch GMO Editor Mark Wiggett expand on this month’s forecast. Visit sbb.com/media/ to view all the video reports

Steel Price Outlook Expectations in January (For Next 3 Months) 20%

North America Europe Asia & Middle East

12%

Decrease

21%

JSW Group’s

25% No Change

25%

Seshagiri Rao

32%

Available now! 55% 63%

Increase

view!

47% 0%

10%

Source: The Steel Index www.thesteelindex.com

20%

30%

40%

50%

60%

70%

For more details visit www.sbb.com or call +44 20 7176 3800

% of Respondents

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Page 1

February 2012

months due to growth in Chinese steel produc

on, while the recent wintry weather in Europe may turn the scrap market upwards. Looking ahead to the second quarter of 2012, producers in US will be trying to move prices upwards again provided demand improves suﬃciently, while European mills hope to maintain momentum a er the stronger first quarter, though demand sen ment is already less certain. In Asia, producers will try to consolidate price rises a er Chinese New Year, but o ake will need to rise to match any increase in produc on. In US, flat products prices appear to be holding steady a er the recent price increases as buyers become more cau ous and have perhaps finished restocking. In Europe, spot flats prices will keep rising during Q1, though mills may need to assess real demand carefully before a emp ng further increases for Q2. Long products pricing in mature markets has been surprisingly strong during the winter months, and should con nue to firm unless weakening scrap levels turn prices downwards. Asia’s economic problems have been fewer than other regions, but hopes of a change in Chinese domes c financial policies appear to be premature. Price levels have been weaker but are now beginning to move upwards, which could last during Q2. Demand should con nue to improve, at least from the poor rates at the end of last year. Chinese markets will also become firmer, as produc on and demand increase and stock‐levels are not too high. The Middle East markets for long products are slightly firmer which helps many regular exporters, especially Turkey. Export prices for CIS products, both flat and long, will also strengthen as demand improves in many of their export markets. Iron ore monthly contract costs for January have risen slightly but are s ll below spot market levels. Spot iron ore prices moved slightly higher during most of January un l the shutdown for Chinese New Year and are likely to firm further in the next few months as Chinese mills’ demand for restocking rises. More customers have now moved to current‐month or spot pricing which most‐closely matches the free market. Spot coking coal prices con nued to weaken during January, and contract levels are also lower. Prices could turn upwards if demand improves, or if the seasonal bad weather in Australia has its usual eﬀect. Scrap prices have been falling sharply in late January, but may stabilise if collec on drops due to the winter weather in Europe.

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“Looking ahead to the second quarter of 2012, producers in US will be trying to move prices upwards again provided demand improves suﬃciently, while European mills hope to maintain momentum a er the stronger first quarter” “Long products pricing in mature markets has been surprisingly strong during the winter months, and should con nue to firm unless weakening scrap levels turn prices downwards”

Page 2

February 2012

The likely scenarios for the next three months are: • US flats spot prices are likely to hold steady or weaken slightly during Q1. Actual demand is likely to slip despite the general economic improvement, as buyers will now maintain inventories at current levels. Output, including the new capacity, con nues to increase and was absorbed by the market last year, but poten al higher imports due to strong currency and price‐levels mean that over‐supply is a possible concern in the spring. • Northern European coil spot prices are likely to con nue rising during February and March, but cau ous buyers and growing imports could make further increases in Q2 more difficult. Output levels have been cut back to match real o ake during December and January, but it remains to be seen whether this con nues during Q1, especially if restocking has been completed. • Southern European flat products prices rebounded sharply during January, as produc on was cut back. Demand should con nue to be fair during Q1, but mills may increase output and import levels may rise, so price increases in the coming months may again be slower than in the north. • Prices of coils into Asia rose during January. Sen ment has been poor, though it is beginning to improve and demand should grow during Q1. Prices are likely to increase further in the first quarter, following other key regions, but may then remain stronger for longer. • Domes c Chinese flats pricing should be firmer in Q1, as end‐user demand is expected to improve in 2012 above recent poor levels. However, output levels are likely to rebound during Q1, especially if demand improves. • Long products’ pricing should con nue to be firm in Europe and US during February, despite demand being typically low due to the season, unless falling scrap prices have more effect. Prices in Asia have also risen slightly, in line with billet and scrap levels. Prices are likely to increase if seasonal demand remains fair in Q1, unless lower scrap pricing affects sen ment. • The spot market for 63% iron ore should con nue to rise slightly a er the generally upwards move during January, with prices finishing the month at US$ 145‐ 147/dmt. Availability of Indian material has improved at these higher levels, but weather could affect deliveries from other origins during Q1. • Scrap prices fell sharply at the end of January, but could rise later in February in most markets as collec on rates are hit by bad weather. However, winter has not yet hit USA, so prices could remain weaker which would affect imports into Turkey. European domes c levels had strengthened during January and prices could rise further if mill demand improves in the new year. Asian mills’ scrap demand is likely to increase over the next few months, which may absorb some excess material in North America. WSA figures show that global output rose slightly by 1.7 million tonnes (m t) during December, though daily produc on fell 2%. Chinese monthly produc on rebounded to 52.2 m t; its 2011 monthly figures total 683 m t, an increase of around 9% from last

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“...poten al higher imports due to strong currency and price‐levels mean that over‐supply is a possible concern in the spring” “Output levels have been cut back to match real o ake during December and January, but it remains to be seen whether this con nues during Q1, especially if restocking has been completed” “Prices of coils into Asia rose during January. Sen ment has been poor, though it is beginning to improve and demand should grow during Q1”

Page 3

February 2012

year’s output. Most regions showed a steady daily output, meaning actual produc on rose due to the longer month, though EU‐27 produc on fell sharply. On this basis, the growth in global produc on for 2011 was 6.8% above 2010, and the sum of the monthly figures was 1.49 billion tonnes. In addi on, Chinese output for 2010 was revised upwards by 11.2 m t, as an cipated early in 2011, and WSA has re‐evaluated the China produc on figure for 2011 by assuming a similar correc on, giving a total of 695.5 m t, sugges ng a 2011 annual increase of 8.9%. However, there is less reason to assume that output has been under‐ reported in late 2011 compared with the year before. Adding this to more than 20 m t of addi onal Asian output which is only declared annually, last year’s global annual total is restated by WSA as 1.527 billion tonnes, an increase of 6.8% on 2010. GLOBAL OVERVIEW US flats spot prices moved up another US$ 30/st at the start of January as the previous price increases were accepted by buyers, but subsequent a empts at further rises stalled. Stockholder demand has been brought forward again, and appears complete, but end‐user o ake is looking lacklustre and may not improve during the first quarter. In Europe, prices have risen strongly during January, and producers are likely to secure higher levels for February and March before considering increases for Q2. O ake is s ll steady in Asia and flats and longs prices have moved slightly upwards during January, and there are a few signs of improved sen ment a er Chinese New Year. Domes c China demand for flats has been weaker during January, but restrained output has kept prices steady and several key mills have maintained their list prices for the rest of Q1. Long products consump on is s ll be er than usual for the season, and prices have strengthened slightly. Chinese export prices have risen slightly and remain compe ve in regional markets, though levels may now be pushed higher. In US, prices for coil products had been rising during December and successive producer increases were achieved more easily. Levels rose again at the start of January but there were no further rises as buyers became more resistant. Produc on levels remained high in December, as the recent new capacity comes fully on‐line, and are likely to con nue to grow in January. Plate prices rebounded upwards but by smaller amounts, while rebar producers kept prices steady before pos ng a par al increase at the start of February as the scrap pricing mechanism rose. Prices for flat steel products in European markets rose sharply during January. European producers have achieved con nual price increases, but real demand is generally lacklustre and the re‐stocking ac vity will not last into Q2. Further increases appear likely for February and March HR Coil US$/t deliveries. Produc on levels dropped sharply in December, and import volumes have been low. However, the stronger currency and be er prices could a ract more import material in the near future. Prices for HR coil in Asia increased slightly, though CR and HDGalvanised coil prices were unchanged during January. They are expected to rise slightly as o ake may improve during the rest of Q1. Flat products prices in China have increased slightly despite slower demand, as mills announced unchanged list prices to try and Graph 1

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“WSA figures show that global output rose slightly by 1.7 million tonnes (m t) during December, though daily produc on fell 2%” “Domes c China demand for flats has been weaker during January, but restrained output has kept prices steady and several key mills have maintained their list prices for the rest of Q1” “Long products consump on is s ll be er than usual for the season, and prices have strengthened slightly”

Page 4

February 2012

maintain a firm spot market. Export prices for flat products from China increased slightly during January and remain compe ve in regional markets, and they could now rise further. Long products demand has remained steady during the early winter months in the mature economies of Europe and US, helped by mild winter weather. Prices in Europe have increased during January, and could increase further in February unless the recent cold snap is too severe. Rebar producers in US have held prices unchanged during January, but announced a par al increase at the start of February due to higher scrap prices. Supply s ll appears to match demand but winter may yet arrive in US and scrap prices could fall in February. Wire rod prices rose in Europe during January, and should remain steady in the next few European Coil Euro/t Ex-works months if end‐user demand is stable. Prices for H Beams, medium and heavy sec ons have been slightly firmer globally, with European prices stable and Asian levels moving upwards. US WF Beams transac on prices have rebounded, a er a sizeable correc on downwards in December. In US, wire rod producers raised their prices sharply during January, and may aim to keep pushing prices upwards while scrap levels are increasing. Merchant bar prices in US were sharply higher during January, and are likely to rise further in February. Graph 2 Billet prices in South East Asia were steady during January and could move upwards in February as prices of export material from Turkey and CIS rebound a er decreases during January. Imported prices of most finished long products into SE Asia were slightly stronger during January, and may rise further in February if demand improves. Rebar, wire rods and merchant bar prices increased slightly during January. Domes c prices for all long products in China slipped during January as o ake eased, though the social housing programme con nued and the longer‐term outlook is for be er demand. Prices could improve if supply and demand remain in balance. Rebar $/t Scrap prices remained steady in US during January, despite sharp declines elsewhere, but strong collec on rates due to mild weather were par ally oﬀset by strong export market demand. Import prices into Turkey fell in late January and US prices began to drop early in February. Prices in Europe could strengthen in February if export demand improves, while collec on rates will fall as the winter weather worsens. Prices for imported scrap into Asia fell but may rise again if material availability drops.

“Flat products prices in China have increased slightly despite slower demand, as mills announced unchanged list prices to try and maintain a firm spot market” “Wire rod prices rose in Europe during January, and should remain steady in the next few months if end‐user demand is stable” “Billet prices in South East Asia were steady during January and could move upwards in February as prices of export material from Turkey and CIS rebound”

Graph 3

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Page 5

February 2012

COIL REGIONAL REVIEW Flat products spot prices in US continued their upwards momentum at the start of January, as an additional US$ 30/short ton rise secured the earlier increases from December. Prices then remained stable as buyers accepted these new levels, but were resistant to further rises and are becoming more uncertain about the second quarter. Prices moved sharply upwards in northern Europe during the month, while levels in southern Europe have also increased even more strongly, as they had fallen further. Apparent demand has been better in all regions, briefly, as many buyers have restocked in the new year and as price rises became definite. Prices in Asia have also risen at the end of January after Chinese New Year, as sentiment then picked up slightly. HR Coil prices in US gained US$ 30/st to US$ 720‐750/st (US$ 794‐827/t) at the start of January, and these levels held during the month. Rapidly rising prices can encourage buyers to bring forward purchases, and re‐stocking has apparently already been achieved, so prices are likely to be stable or weaker in February. CR coil prices rose more slowly, ending January at US$ 810‐840/st (US$ 893‐926/t) as real demand was slow to improve. HD Galvanised coil, which had not fallen so far, saw a larger increase up to US$ 840‐870/st (US$ 926‐959/t). Import levels for most products had fallen when previous price levels were less a rac ve, though recent import licence figures show this is about to change. Mill produc on rates con nued at high levels during December, and it is likely that output will be even higher in January while prices remained firm. The supply‐demand balance in February may need to be re‐examined. Flat products producers in northern Europe have seen spot levels move sharply upwards during January. Daily produc on was cut back during December and may also have been restrained in January. Prices are likely to rise further in the rest of Q1 as actual demand will improve, but Q2 is looking less certain. Restocking since the new year will have finished, while any imports a racted by the recovering strength of the Euro may aﬀect the supply‐demand balance. In northern Europe, HR Coils prices rose to Eur 525‐540/t (US$ 698‐718/t), while CR Coils also increased to Eur 580‐620/t (US$ 771‐824/t). HD Galvanised base prices gained more steadily to Eur 540‐580/t (US$ 698‐771/t), and all coil prices are expected to increase for deliveries in the next two months. Southern European coil prices had fallen sharply during November, but jumped sharply upwards in January. Demand improved somewhat from the low levels at the end of last year and produc on was cut back sharply. It remains to be seen whether there is a real end‐user o ake improvement which will con nue during Q1. HR Coil prices are now at Eur 515‐520/t (US$ 684‐691/t) and these prices may firm slightly in February, though increasing imports could also become a problem. Prices for CR Coil were up HRC $/t to Eur 555‐580/t (US$ 738‐771/t) while HDGalvanised coil base price was also up more slowly to Eur 540‐ 580/t (US$ 718‐771/t). South East Asian HR coil prices moved slightly higher during January to US$ 640‐650/t cfr, and they may firm slightly during February if sen ment con nues to gain. Latest Chinese export prices for HR coil have also risen to US$ 615‐620/t fob, which kept them compe ve in SE Asian markets, and mills may look to push these levels higher. CR coil and HD Galvanised prices in SE Asia were

Coil Price Outlook Products (HRC)

Jan

Feb*

Brazil dom. Del. BRL/t

1960-2100 1960-2025

China dom. Shanghai RMB/t

4220-4280 4260-4280

China export FOB $/t

615-620

E. Asia import CFR $/t

620-650

640-650

Eur import CIF S.Eur pt €/t

495-540

500-535

Jap dom FOT ¥/kg

58-58

Middle East imp CFR $/t

600-700

620-700

N.America dom FOB $/s.ton

690-750

720-750

N.Euro dom Ex-Works €/t

480-540

525-545

Rus Blk Sea export FOB $/t

600-640

630-640

S.Euro dom Ex-Works €/t

515-520

520-530

Ukr Blk Sea export FOB $/t

560-590

570-600

Jan

Feb*

Products (CRC) Brazil dom. Del. BRL/t

2560-2700 2550-2680

China dom. Shanghai RMB/t

5000-5150 5040-5080

China export FOB $/t

670-685

E. Asia import CFR $/t

680-730

Eur import CIF S.Eur pt €/t

530-570

N.America dom FOB $/s.ton

800-840

810-840

N.Euro dom Ex-Works €/t

545-620

585-620

Rus Blk Sea export FOB $/t

680-770

680-700

S.Euro dom Ex-Works €/t

550-580

580-610

Ukr Blk Sea export FOB $/t

630-650

650-670

Jan

Feb*

Products (HDG) China dom. Shanghai RMB/t

4800-4950 4800-4950

China export FOB $/t

695-700

E. Asia import CFR $/t

750-800

Eur import CIF S.Eur pt €/t

570-610

580-600

Mid E. import CFR $/t

800-920

800-850

N.America dom FOB $/s.ton

810-870

840-870

N.Europe dom Ex-Works €/t

540-580

580-620

S.Europe dom Ex-Works €/t

530-580

580-600

*Prices listed are SBB forecasts

Graph 4

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Page 6

February 2012

unchanged during January at US$ 680‐730/t and US$ 750‐800/t cfr, and both are likely to hold steady or gain slightly in February. LONG PRODUCTS REGIONAL REVIEW Rebar prices in Asia and Europe moved slightly higher in January, but were steady during the month in US before rising at the start of February in line with higher scrap pricing. European prices for merchant bar were steady in January, but are likely to rise during February. Construc on industry ac vity was slightly be er while the winter was mild in January, and produc on con nues to be well‐matched to actual demand in the mature markets. In Asia, H Beam, merchant bar and wire rods price levels were slightly stronger in January, and should remain stable or firm during February. Medium and heavy sec ons prices in Europe were stable during January, with prices at Eur 610‐640/t (US$ 811‐851/t), and levels are expected to rise again in February. SE Asian H‐Beam price levels were higher at US$ 810‐840/t cfr, a er dropping in December. Prices of WF Beams in US rebounded up to US$ 780‐810/st (US$ 860‐893/t) at the end of January, a er a large downwards correc on during December. Wire rod pricing in US also rose sharply in January to US$ 760‐780/st (US$ 838‐860/t). Rebar prices in US were unchanged at US$ 760‐780/st (US$ 838‐860/t) in January, but mills were aiming to raise prices in February by US$ 15/st which is half of the US$ 30/st scrap increase. Rebar prices in Europe rose again during January and finished at Eur 560‐580/t (US$ 744 ‐771/t), and could increase slightly in February unless scrap weakens. Wire rod prices also gained strongly during January to Eur 550‐570/t (US$ 731‐758/t), and should remain steady if end‐user demand remains firm. Rebar prices in SE Asia ended the month US$ 10/t higher at US$ 640‐650/t cfr. Import price levels for merchant bars increased slightly to US$ 740‐760/t cfr, while imported wire rod prices into SE Asia were just higher at US$ 660‐680/t cfr. Billet prices were stable in January in SE Asia, and finished the month at US$ 640‐650/t cfr, before slipping at the start of February. Export prices for CIS and Turkish material fell sharply in early January from US$ 600/t level, falling back to US$ 560‐575/t fob at the end of the month. CIS billet producers could push prices upwards if Asian demand improves, as there would then be more buyers worldwide compe ng for their material. COMMODITY PLATE REVIEW Wire Rod $/t Plate prices rose in northern and southern Europe during January, but increased slightly in Asia and rebounded upwards in US a er dropping in the previous six months. Chinese export prices have also risen slightly as Asian prices firmed, and levels are expected to increase further in February. In USA, commodity plate prices increased regularly during January, in line with other products. Demand has been average, but the level of imports has been compara vely low. As inventory levels appear to Graph 5

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Longs Price Outlook Products (Debar/Rebar)

Jan

Feb*

Turkey export FOB $/t

650-690

645-655

Blk sea export FOB $/t

620-640

630-640

630-650

640-650

4120-4240

4130-4170

Eur dom del €/t

560-580

Eur import CIF S.Eur pt €/t

540-560

550-560

53-53

Mid E. import CFR $/t

700-759

N.America dom FOB $/s.ton

760-780

775-795

Products (Beams /Sections)

Jan

Feb*

E Asia import CFR $/t

810-840

820-840

Eur dom del €/t

610-640

620-690

71-71

780-810

E. Asia import CFR $/t China dom. Shanghai RMB/t

Jap dom FOT ¥/kg

Jap dom FOT ¥/kg N.America dom FOB $/s.ton Products (Merchant Bar)

Jan

Feb*

4400-4500

E Asia import CFR $/t

740-760

Eur dom del €/t

565-580

590-650

N.America dom FOB $/s.ton

875-905

905-935

China dom. Shanghai RMB/t

Products (Wire Rod)

Jan

Feb*

640-670

650-670

4270-4280

4150-4170

E Asia import CFR $/t

660-680

Eur dom del €/t

545-570

545-575

Eur import CIF S.Eur pt €/t

550-570

550-560

66-66

760-780

790-810

Blk sea export FOB $/t China dom. Shanghai RMB/t

Jap dom FOT ¥/kg N.America dom FOB $/s.ton *Prices listed are SBB forecasts

Page 7

February 2012

be normal, there will not be any further stock‐building and prices are likely to ease in February as imports are expected to recommence. Produc on levels will again need to be matched to actual demand. Prices rose by US$ 70/st and are at US$ 1020‐1040/st (US$ 1124‐1146/t) at the end of January. Plate prices increased slightly in northern Europe by Eur 10/t and transac on prices are in the range Eur 600‐640/t (US$ 797‐851/t), and they should con nue to rise in February. Stockists had reduced their inventories over year‐end, and end‐user demand may improve slightly in the first quarter, so prices will rise if output does not exceed actual demand. Southern European commodity plate producers also saw spot price levels gain slightly during January, despite lacklustre demand as produc on was cut back sharply in Italy and Spain. Current levels are at Eur 570‐600/t (US$ 758‐797/t), and these are expected to increase further in the next few months unless produc on is brought back too quickly. In SE Asia, prices for commodity plate rose to US$ 630‐650/t cfr, and are expected to increase slightly in February if demand improves. Export prices of Chinese material have also risen by US$ 5/t to US$ 615‐620/t fob, which remains compe ve in the Asian region. SCRAP AND RAW MATERIALS REVIEW Scrap prices began falling in most regions except North America during January, as healthy availability was met by uncertain demand. US domes c prices remained stable un l month end. US export prices had already been weakening as the import demand from Turkey fell sharply, and prices are s ll likely to be under Plate $/t pressure un l collec on rates fall when winter finally arrives. Northern European levels had risen early in January before remaining at the same levels in Euro terms at the end of January. Scrap prices in southern Europe were stable, at similar levels as in the north, though the weaker Euro meant export material was cheaper against the dollar. Price levels in SE Asia were steadily falling during January, but are likely to con nue to be steady or slightly weaker in February as oﬀers Graph 6 from exporters decline. Domes c scrap prices in US for No 1 Bundles and Bushelling remained steady in January at US$ 530‐535/lt, but will fall back in February. Shredded scrap was also unchanged during January at US$ 470‐475/lt. In northern Europe, shredded scrap prices moved up by Eur 15/t from December’s levels and finished January at Eur 320‐335/t (US$ 425‐445/t), while prices in southern Europe rose slightly to Eur 330‐350/t (US$ 439‐465/t). Export prices of shredded scrap from Europe decreased by US$ 25/t to US$ 402.50‐407.50/t fob and may weaken further in February if overseas demand con nues to be weak. Scrap prices in Asia fell during January from US$ 475‐480/t cfr for HMS 1/2 down to US$ 460‐470/t.

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Plate Price Outlook Jan

Feb*

4200-4300

CIS export FOB $/t

660-700

660-710

N.Europe dom Ex‐Works €/t

590-640

615-640

S.Europe dom Ex‐Works €/t

570-600

590-620

Eur import CIF S.Eur pt €/t

550-600

E. Asia import CFR $/t

630-650

640-650

N.America dom FOB $/s.ton

950-1040

940-960

China export FOB $/t

615-620

Products

China dom. Shanghai RMB/t

*Prices listed are SBB forecasts

“Stockists had reduced their inventories over year‐end, and end‐user demand may improve slightly in the first quarter, so prices will rise if output does not exceed actual demand”

Page 8

February 2012

Spot iron ore prices rose slowly but steadily during most of January, though the second half of the month was very quiet due to Chinese New Year. Prices may move higher in early February if Chinese buyers come back into the market to restock, as an cipated. Indian supply oﬀers are increasing, though bad weather can aﬀect shipments from Australia and Brazil at this me of year. More miners and customers in China are agreeing current‐month or weekly pricing periods which follow the spot market even more closely. For January, spot prices finished above the past‐quarters Scrap US$/t contract level and the monthly average, and this posi on will con nue if prices remain firm. The spot market for Indian origin material 63% Fe iron ore rose during January, star ng at US$ 142‐145/dmt and rising US$ 5/dmt before slipping back to US$ 145‐147/dmt cfr. Supply availability is unlikely to improve in the short‐term, though Indian suppliers appear to have absorbed the recent increase in export taxes. In the short‐ term, prices for iron ore are likely to improve, especially if Chinese mills’ output returns to last year’s levels. Graph 7 Coking coal contract prices for this quarter have fallen again, while spot prices have dropped further to US$ 220‐230/t fob Australia at the end of January. Some poor weather condi ons have already hit East coast Australia, but prices have not yet reacted and further weakness is expected in February.

GLOBAL OVERVIEW OF PRODUCTION The monthly produc on figures from WSA show that December’s global produc on was 1.7 million tonnes more than the month before. November is a shorter month, so December’s actual tonnage calculates to a 2% decrease in daily output rate compared with November. The monthly output was almost 2% higher than December 2010. World monthly produc on in December was 117.1 million tonnes, which means that total global output for 2011 is 1,490 million tonnes, 6.8% above 2010’s level. European produc on dropped sharply by 1.65 million tonnes, while total Raw Materials US$/mt Asian output increased by more than 2 million tonnes, chiefly due to China’s 2.3 million tonnes rise. Most other regions showed steady daily output, so actual volumes rose in CIS, Other Europe and North America. EU27 output of 12.5million tonnes in December was nearly 12% lower than in November. There were sharp decreases in output in France and Germany, while the decline in Italy and Spain was over 20%. In Other Europe, Turkey’s monthly output rose again to 3.1 million tonnes, the highest this year. The Graph 8 total CIS output was 1.9% higher than

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“US export prices had already been weakening as the import demand from Turkey fell sharply, and prices are s ll likely to be under pressure un l collec on rates fall when winter finally arrives” “In northern Europe, shredded scrap prices moved up by Eur 15/t from December’s levels and finished January at Eur 320‐335/t (US$ 425‐ 445/t), while prices in southern Europe rose slightly” “Indian supply oﬀers are increasing, though bad weather can aﬀect shipments from Australia and Brazil at this me of year”

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February 2012

in November, with Russia increasing produc on by 5.7% but Ukraine’s daily levels slipping. US output was 7.3 million tonnes in December, which was 4.3% higher than November’s figure. South American output was just lower in December than the previous month at 3.8 million tonnes. Brazilian produc on was 2% lower at 2.7 million tonnes. China’s monthly output of 52.2 million tonnes was 4.6% higher than November’s figure. December’s produc on is an increase of 1% on December 2010’s output. India’s monthly produc on was es mated as 2.5% higher at 6.2 million tonnes. Japan’s output was 3.5% below November’s level, and South Korea’s produc on was around 3% higher compared to the previous month at 6 million tonnes. Taiwan’s es mated produc on rose by 3.2% to 1.92 million tonnes. Their combined total output is around 16.3 million tonnes, which is a 1% decrease from the joint monthly produc on level achieved in December 2010. The Asian countries’ total produc on of 76 million tonnes was an increase of 1% from December 2010. This region accounted for 63.7% of global produc on in December, in line with normal figures for most months un l recently. World output excluding China was 64.9 million tonnes in December. World output excluding China for the whole year was 806.8 million tonnes, compared to 768 million tonnes in 2010, an increase of 5%. As noted earlier, China’s 2010 produc on was re‐stated by CISA and increased by 11.2 million tonnes to 638.7 m t, which also contributed to the rise in 2010’s global output to 1,429.9 m t, compared Crude Steel Output (thousand tonnes) with the total of monthly figures of 1,395.4 m t. Oct 2011 Nov 2011 Dec 2011 Total 2011 28,013 26,421 25,204 327,046 WSA has applied the Europe 15,193 14,193 12,541 177,431 same percentage growth - EU 27 figure from the monthly 3,325 3,084 3,345 37,181 - Other Europe data for Chinese 9,495 9,144 9,318 112,434 - CIS produc on, 8.9%, to the 9,893 9,745 10,134 118,927 new 2010 figure, which N America gives an increase on the 7,156 7,032 7,334 86,247 - USA monthly‐derived total 3,959 3,814 3,795 48,357 S America from 683.3 m t to 695.5 1,206 1,090 1,202 13,966 Africa m t for 2011 Chinese output. However, there is 1,681 1,641 1,718 20,325 Middle East 78,308 72,223 74,581 954,190 less reason to assume Asia that produc on has been 54,673 49,883 52,164 683,265 - China under‐reported at the 473 434 424 7,248 end of last year compared Oceania 123,533 115,368 117,058 1,490,060 with 2010. Adding in World Total produc on that is only Source: WSA declared on an annual basis, around 24.6 m t mainly from Asian countries, brings WSA’s total global annual produc on to 1526.9 m t, an increase of 6.8% from its 2010 annual output total of 1429.9 m t calculated on the same basis. 

“The spot market for Indian origin material 63% Fe iron ore rose during January, star ng at US$ 142‐145/dmt and rising US$ 5/dmt before slipping back to US$ 145‐ 147/dmt cfr” “World monthly produc on in December was 117.1 million tonnes, which means that total global output for 2011 is 1,490 million tonnes, 6.8% above 2010’s level”

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