SBB GMO September 2011

A Steel Business Briefing Publication

September 2011

US producers push prices up, but Europeans waiting for increased real demand

Demand in the mature economies has not yet picked up after the summer months and it is not clear that there will be a substantial upturn during the next two or three months. Destocking had been a factor before the shutdowns, compounded by weaker prices, and stock levels have not fallen as low as anticipated. Consequently, the possibility of a restocking phase is less likely. End-user offtake continues to be steady in most markets, but will not be as strong as during the first half of this year according to PMI survey indicators.

The decline in consumption, which began in mid-Q2 as predicted, should begin to improve during September and the strength of any growth in demand will determine the success of mills’ next price increases. US flats producers have already secured some price rises, while most European mills appear to be waiting before announcing their levels for Q4.

Economic indicators are generally flat implying no growth in steel consumption in the coming months, though some industry-sectors are more optimistic, especially the automotive industries in US and in Europe. The social housing programme in China is continuing strongly and, even if targets are cut back, will still require substantial volumes of long products. Most Asian economies should pick up for their usual strong season in Q4, after being fairly stable in Q3. Indeed, the Chinese economy seems to have begun improving already in August.

Prices of flat products in US will rebound upwards to partially achieve the two increases announced in August, though further rises will only be possible if demand improves or output is reduced. Raw material costs remain high, with scrap prices holding unusually steady since Q2, which gives producers a clear bottom-line on ►

Global Overview Pg 3

Coil Regional Review Pg 7

Long Product Review Pg 8

Plate Review Pg 8 Scrap Review Pg 9 Global Overview of Production Pg 10

The key question is whether demand does improve promptly in US and Europe, which would ensure price momentum turns upwards at the start of Q4.

THE OUTLOOK FOR FLATS IS FOR PRICES TO CONSOLIDATE IN US IN SEPTEMBER, BUT COULD THEN WEAKEN. EUROPEAN FLAT PRICES SHOULD HOLD AND IMPROVE SLIGHTLY, BUT IMPROVED DEMAND MAY ENSURE HIGHER LEVELS SOMETIME IN Q4. ASIAN FLATS PRICES COULD RISE SLOWLY AT THE START OF Q4. LONG PRODUCT PRICING SHOULD ALSO BE FIRMER IN ASIA, AND COULD STRENGTHEN IN EUROPE AND US IF SCRAP INCREASES.

Market Sentiment Survey

Watch GMO Editor Mark Wiggett expand on this month’s forecast.

Steel Price Outlook Expectations in August (For Next 3 Months)

41% 39%

Decrease

32% 23% 41%

No Change

Available now!

31% 36% 20%

Increase

37% 0%

10%

20%

30%

40%

Visit www.sbb.com/media/ to view video reports

North America Europe Asia & Middle East 50%

60%

% of Respondents www.thesteelindex.com

Source: The Steel Index

© Copyright The Steel Index 2011

For more details visit www.steelbb.com or call +44 20 7645 9400

SBB Global Market Outlook

Sep `11

► costs. Long products prices may also rise slightly, chiefly due to scrap costs, though demand should now begin to slacken.

Monthly output in US has continued at consistently high levels so far this year, as the new start-up production has added to steady on-going output and there have been no cut-backs.

European flats prices have continued to slip slowly backwards during August, but should now stabilise and producers will seek some increases for Q4 when the market conditions allow. However, producers’ expectations must have been revised downwards and only small increases are expected. End-user demand will be lower than in the first half of the year, and stockholders are unlikely to restock significantly, although there may be some buying ahead of any increases. Production has fallen in July and is likely to remain lower for August, and some furnace closures are now being announced.

Demand in Asia has remained fair during the summer months, and should continue to improve in the next three months as seasonal factors take effect. Prices have been stable, supported by firmer iron ore and steady scrap raw materials costs. Domestically in China, prices firmed slightly during August and could be steady or rise slightly in September as key producers have announced unchanged prices. Demand should be strong and output will continue at current high levels.

The likely scenarios for the next three months are: • Prices for US flats have rebounded upwards in late August as mills announced two separate increases in quick succession. Prices are likely to consolidate during September but not improve further unless demand improves or output is cut back.

• Producers of flat products in northern Europe saw spot prices slip during August but levels should hold even while buyers are waiting for the mills’ next price announcement, which is likely to be quite modest. There is likely to be an improvement in demand during September, but stocks have not been run down as anticipated.

• Asian demand continues to be steady and real demand should improve during Q4, and sentiment has already risen in August. Price levels in SE Asia are likely to stabilise or possibly rise slightly, and this firmer market should be sustained during Q4.

• Long products’ pricing has remained steady over the summer in Europe, but some producers in US have contemplated increases. Prices should stay firm if demand remains fair, especially as scrap levels are holding up, and output matches consumption.

• Asian long products, scrap and billet prices have been stable, during a steady third quarter. Pricing should move slowly upwards with improved demand from September onwards.

• Spot iron ore prices in China rose, slipped and then increased again within a tight range in August as mills in China returned to the market to restock despite fearing that prices were too high. Prices are likely to remain firm, as demand should improve, while Indian material availability is limited.

• Scrap prices have remained very stable in Europe, US and Asia during August and could strengthen in the next few months as mills’ demand improves while collection slows down. Turkish scrap prices have also held firm, and stronger demand based on growing export sales could also push price levels higher.

In China, output eased slightly in July but rose again in early August, so is still on schedule to exceed 700 million tonnes for 2011. Output typically grows in the remaining months, but there could again be some energy-conservation measures as happened last year. Demand has been firm and could increase in the seasonally-strong months.

Exports from China have begun to rise, which absorbs some production, and volumes into regional markets could increase if domestic demand slips below output levels.

Total global crude output in July fell by almost 1 million tonnes from June’s monthly figure, which meant a drop of 4% in the daily rate. China’s production was just under ►

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SBB Global Market Outlook

Sep `11

► 60 million tonnes. Actual output rose in Other Europe, CIS, US and South America.

Asian output fell on a daily basis but Japan’s actual production rose. India’s monthly production was estimated at 6.2 million tonnes. European production fell sharply by over 1 million tonnes, with most of the shortfall in Spain.

During August, spot prices of iron ore into China moved slowly upwards for most of the month, ending just below US$ 180/dmt cfr China as buyers returned to the market.

Prices could firm slightly during September if buyers remain in the market, purchasing for the rest of the year, especially as Indian availability is still likely to be restricted.

The Q4 “mini-benchmark” price for iron ore contracts for the October-December quarter, where based on the previous quarter’s average index price lagged by one month, is 0.6% below Q3’s calculated level. The spot price at the end of August was above the Q4 contract price, at a level that is at the top of the recent close range of pricing.

Scrap prices have remained very steady during August in US, Europe and Asia, when some reductions are normally seen. However, Turkey’s import demand has reflected slower export activity for its long products, but volumes are now expected to increase.

Further demand growth in Asia should mean that strong scrap prices are likely to continue for several months.

Looking further ahead in the fourth quarter of 2011, it is likely that producers in China and Asia will be trying to increase prices if demand is stronger. US producers, however, may have to ride out short-term price decreases due to earlier purchasing this month before attempting larger increases in advance of year-end buying, as they have done successfully in the past two years.

In Europe, producers will announce price increases as late as possible, but they will be nominal rises to turn around the falling market and will not regain late-Q2 levels. These increases should be achieved during the fourth quarter as demand slowly improves and output cutbacks take effect. However, inventories will be run down for year-end, especially as further price increases are unlikely at the start of Q1.

GLOBAL OVERVIEW US HR coil spot prices continued to move downwards in the first half of August, until US Steel announced a US$ 60/short ton increase which was swiftly backed by other producers. Spot prices immediately began rising, though the full increase was only achieved after a Graph 1 subsequent US$ 40/st rise was posted by different mills. There are HR Coil US$/t signs of growing economic activity, but fears that the second half will be slower than the first six months. Enduser demand could improve in the next few months. Small spot price increases are expected, but the second increase will be difficult to achieve in full as production plus imports are likely to exceed apparent demand. Consumption for flat products in European markets is likely to be slow to improve for the next two months, and prices will slip before possibly rebounding to nearly end-Q2 levels. Prices have remained stable for HR coil in Asia. Demand ►

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“European production fell sharply by over 1 million tonnes, with most of the shortfall in Spain”

“US producers, however, may have to ride out shortterm price decreases due to earlier purchasing this month before attempting larger increases in advance of year-end buying, as they have done successfully in the past two years”

“Consumption for flat products in European markets is likely to be slow to improve for the next two months, and prices will slip before possibly rebounding to nearly end-Q2 levels” Page 3

Sep `11

SBB Global Market Outlook ► has continued to be fair during July and August, but it should now begin to

improve as Q4 is the strongest quarter. Long products offtake will begin to slow in Europe and US, but production levels have been restrained and prices could firm slightly, especially if scrap levels rise. Longs demand in Asia should grow, and rebar prices could increase from now onwards, with raw materials costs also rising.

Spot prices of CR and HDGalvanised coils in US have also rebounded upwards during August, though not quite as quickly as HR coils. There has possibly been some unplanned restocking once the price increases took effect, so apparent demand may be lower in the coming months making further price rises more difficult. End-user demand may slowly improve but supply-chain stock levels will need to be rebalanced.

Production has continued to rise until July, with recent start-ups adding to the current output and few signs of cutbacks.

European flats producers saw spot prices slip slowly during August after producers dropped any attempts to post new levels during Q3. Apparent demand has been weak and stock levels are now thought to be higher than buyers prefer. Mills’ new price aspirations for Q4 are likely to be modest and only to return to end-Q2 levels, but any announcement should turn the market slowly upwards. Output in Europe in July fell sharply below recent high levels, but this was mostly due to the Spanish summer slowdown. Italian production will fall similarly in August, and there are now some announcements of mill closures for the coming few months in northern Europe.

HR, CR and HDG coil prices have also moved further downwards in southern Europe during August as demand remained poor while output at a higher level. Prices could remain stable or begin to firm as offtake returns after the summer, if production is restrained, even before mills attempt price rises later in Q3 or in Q4. Import volumes have been falling, as offer prices and lead-times have become less competitive against domestic levels.

For buyers in South East Asia, coil prices have been steady or firmer during August, and are likely to firm at the beginning of Q4. Chinese export availability has fallen while domestic demand has been good and prices have remained stable during August, keeping regional markets pricing firm. Volumes may increase later in the year if Chinese production exceeds domestic demand, but exports are likely to have been lower during Q3.

Domestic HR coil spot prices in China slipped slightly during August, as buyers’ sentiment turned amid greater economic Graph 2 worries, but price levels steadied at the end of the month. Key mills are keeping European Coil Euro/t Ex-works their September and October prices unchanged which shows their belief that the market will be stable, and the spot market could then rise if demand improves. There may be some inventory building in case of energy-related supply disruptions later in the year, and real demand should grow as this is the strong quarter, though there are concerns that the flats market will not be as robust as for long products.

Long products demand in the mature economies has remained steady, at reduced levels, over the summer as problems in their construction industries continued. Producers appear to be matching the slower activity, and there ►

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“Long products offtake will begin to slow in Europe and US, but production levels have been restrained and prices could firm slightly, especially if scrap levels rise”

“For buyers in South East Asia, coil prices have been steady or firmer during August, and are likely to firm at the beginning of Q4”

“There may be some inventory building in case of energy-related supply disruptions later in the year, ..... though there are concerns that the flats market will not be as robust as for long products”

Page 4

Sep `11

SBB Global Market Outlook ► may be only a slight fall in demand during the next few months. Prices in Europe have remained firm while US prices have been stable during August, but are expected to increase as scrap prices rise. There may be further small gains in longs prices in the next few months, especially as stock levels are around normal for the time of year.

Demand in Asia has been steady or better than expected so far in Q3, and price levels remained stable during August.

Prices of CIS and Turkish billet slipped back during August, as demand in nearby markets and Middle East remained poor. However, Asian billet prices firmed slightly.

CIS long products prices were also steady as strong domestic demand reduced export availability.

Prices for medium and heavy sections in Europe in August have remained generally stable and could firm slightly in September, with some mills looking to achieve further increases. US mills have kept WF Graph 3 Beams transaction prices unchanged in August, and they are likely to remain Rebar $/t stable in September as the producers continue to fight for market share and against imports. Imported price levels for H-Beams into Asia rose in August, but are now expected to remain steady for the next month.

In US, demand for long products has been reasonable over the summer, though there has been little stock rebuilding. Production has remained in line with consumption. Rebar prices have been steady since June, and could be raised in September if scrap pricing stays strong. Wire rod prices were also increased in June, and have then been stable, but may rise further as end-user demand remains firm.

“Prices of CIS and Turkish billet slipped back during August, as demand in nearby markets and Middle East remained poor”

“In US, demand for long products has been reasonable over the summer, though there has been little stock rebuilding”

In Asia, rebar prices were steady during August as demand continued to be reasonable for the third quarter, but wire rod and merchant bars prices rose. Offer prices for most long products in SE Asia are expected to strengthen in September, especially if CIS origin longs also become more expensive. Demand in Asia should rise during this quarter, which ought to support firmer prices.

Domestic prices of long products in China rose early in August, before slipping back later in the month as oversupply fears grew. They are likely to rebound upwards in September as demand should rise going into the strong quarter. Sentiment in the construction industry is still firm as the social house-building programme continues, even if there will be some slowdown next year.

In Europe, rebar has firmed slightly while wire rod prices were steady during August, as producers matched the real level of demand. Both products prices are likely to slowly increase in September as real demand should be fair and raw materials costs will be firm.

Commodity plate prices fell during August in northern Europe, while levels in the south were more stable after earlier falling lower. US plate producers saw spot prices decrease during August as weaker demand finally took effect. Levels continued to fall even when coil pricing had turned upwards and they will be under further pressure due to strong imports. In SE Asia, import prices rose slightly, while export prices for Chinese plate were unchanged. Demand, which had been weaker than expected, should begin to improve and these price levels may become firmer. ►

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“Commodity plate prices fell during August in northern Europe, while levels in the south were more stable after earlier falling lower”

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Sep `11

SBB Global Market Outlook ►

►

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Sep `11

SBB Global Market Outlook ► COIL REGIONAL REVIEW Flat products spot prices in US have risen during the second half of August after falling again at the start of the month. The producers’ two increases immediately turned prices upwards, but the full rises have not yet been achieved. Prices have been unchanged in South East Asia, but could now become firmer during Q4.

Producers in northern Europe are likely to announce new coil prices later in Q3 or at the start of Q4, which should hold and then lift the prevailing spot pricing.

Southern European HR coil prices have continued slipping downwards but CR and HDGalvanised coil prices were more stable though activity has been quiet during the summer slowdown. Chinese export prices of HR coil held steady in August but may rise if exports to regional markets increase.

Coil Price Outlook Aug

Sep*

24352450 47604850

19602100 47604790

China export FOB $/t

710-715

710-715

E. Asia import CFR $/t

720-740

720-740

Eur import CIF S.Eur pt €/t

500-560

520-565

67-67

65-65

Middle East imp CFR $/t

680-760

710-750 670-690

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

Prices of HR coil in USA fell to US$ 630-640/st (US$ 694-705/t) before rebounding to US$ 670-690/st (US$ 738-760/t) at the end of the month. Apparent demand may have been pulled forward so offtake may not rise again until later in Q4, and prices could slip initially before rebounding in the next few months. Inventory levels in US had not been run down and could become too high again. CR Coil prices were also lower before moving up to US$ 770-810/st (US$ 849-893/t) at the end of August, and should rise further in September. HD Galvanised coil prices were also down by US$ 40/s. ton but then rose to US$ 820-850/st (US$ 904-937/t), and look likely to increase in September.

China dom. Shanghai RMB/t

N.America dom FOB $/s.ton

630-690

Flat producers in northern Europe saw spot prices move slightly downwards during August, although they were holding steady towards the end of the month. Prices may be stable or begin firming in September once mills announce new prices for Q4. Real demand should improve in this month or next, which will support small price increases.

N.Euro dom Ex-Works €/t

520-570

510-530

Rus Blk Sea export FOB $/t

690-705

700-710

S.Euro dom Ex-Works €/t

500-530

510-550

Ukr Blk Sea export FOB $/t

680-700

685-705

Aug

Sep*

27803005 53005520

24002600 54205520

China export FOB $/t

750-760

750-760

E. Asia import CFR $/t

780-830

780-830

Eur import CIF S.Eur pt €/t

580-640

580-640

N.America dom FOB $/s.ton

760-860

770-810

N.Euro dom Ex-Works €/t

585-640

580-620

Rus Blk Sea export FOB $/t

780-810

790-810

S.Euro dom Ex-Works €/t

590-650

600-660

Ukr Blk Sea export FOB $/t

770-800

770-800

Products (HDG)

Aug

Sep*

China dom. Shanghai RMB/t

57205800

57205800

China export FOB $/t

820-830

820-830

E. Asia import CFR $/t

850-900

850-900

Eur import CIF S.Eur pt €/t

625-650

635-655

890– 1000

9001000

HR Coil prices in northern Europe were at Eur 500-550/t (US$ 683-751/t) at the end of August. CR Coils prices eased slightly to Eur 575-620/t (US$ 785-846/t). HD Galvanised products prices were more stable at Eur 730-800/t (US$ 996-1092/t).

Southern European coil prices have continued to be weaker than northern levels. HR coil prices dropped by Eur 15/t during the month and are likely to remain stable or rise slowly as business activity returns. HR coil prices are now at Eur 500-530/t (US$ 683723/t), while CR coil prices are Eur 600-650/t (US$ 819-887/t). HDGalvanised coil prices were unchanged at Eur 580-650/t (US$ 792-887/t) by the end of August.

South East Asian HR coil prices were unchanged during August at US$ 720-740/tonne cfr. Both CR and HDGalvanised coil prices in SE Asia rose slightly in August, and may hold steady or gain further in September. CR Coil prices were up to Graph 4 US$ 780-830/t cfr during August and HRC $/t HDGalvanised coil prices increased to US$ 850-900/t.

Chinese HR Coil export offers increased to US$ 710-715/t fob at the end of August, and could rise slowly in the next few months if demand from regional markets improves. Domestic Chinese prices slipped during August, but sentiment should improve during September. There could be further gains during September if demand for flat products improves after being weak for the past few months. ►

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Jap dom FOT ¥/kg

Products (CRC) Brazil dom. Del. BRL/t China dom. Shanghai RMB/t

Mid E. import CFR $/t N.America dom FOB $/s.ton

790– 930 820-850

N.Europe dom Ex-Works €/t

730-800

730-800

S.Europe dom Ex-Works €/t

580-650

600-660

*Prices listed are SBB forecasts

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Sep `11

SBB Global Market Outlook ► LONG PRODUCTS REGIONAL REVIEW In US, longs producers have held prices steady for rebar during August but are expected to seek an increase in September. Long products prices in Europe have risen slightly since the start of August, despite lacklustre demand as the usual summer upturn was lower than usual. In Europe, even a slight drop in demand during Q4 could see prices rise. Prices in Asia were unchanged, but demand should now improve going into Q4. If scrap prices strengthen, this will put upwards pressure on finished product prices in Asia and US. In China, demand for social housing construction remains strong, so domestic prices are likely to rebound after they slipped at the end of August.

Longs Price Outlook Products (Debar/Rebar)

Medium sections prices in Europe were almost unchanged during August, and they may remain stable this month, but some producers will be looking for increases. Rebar prices rose slightly to Eur 530-590/t (US$ 723-805/t) at the end of August, but could increase further in September. Wire rod prices were steady during August at Eur 540570/t (US$ 737-778/t) and producers could also aim for a small increase in September or October.

Wire rod producers in US held their prices steady during August at US$ 930-950/st (US$ 1025-1047/t) based on stable scrap pricing, and should be able to maintain or raise these levels later in Q4 as imports slacken.

Graph 5

Wire Rod $/t

Aug

Sep*

Turkey export FOB $/t

705-750 712-722

Blk sea export FOB $/t

690-710 705-720

E. Asia import CFR $/t

730-740 720-740

China dom. Shanghai RMB/t

47304820

47404750

Eur dom del €/t

530-590 530-600

Eur import CIF S.Eur pt €/t

540-560 560-580

Jap dom FOT ¥/kg

59-59

57-57

Mid E. import CFR $/t

730-760 730-760

Rebars in US have remained unchanged at US$ 720-740/st (US$ 794-816/t), and could increase in September if scrap rises and demand holds up. Producers of WF Beams in USA held their price levels steady at US$ 840-850/st (US$ 926-937/t), and prices are likely to remain stable or rise in September or October if scrap levels increase.

N.America dom FOB $/s.ton

720-740 720-740

Import prices for rebar into SE Asia remained stable during August at US$ 730-740/t cfr, and are likely to remain steady or increase during September.

Merchant bars rose US$ 20/t during August. Wire rod prices also increased

by US$ 30/t during August to US$ 750770/t cfr. Imported H Beam prices rose and were at US$ 860-870/t during August.

E Asia import CFR $/t

750-770 750-780

Eur dom del €/t

580-625 590-635

N.America dom FOB $/s.ton

835-890 860-890

CIS billet prices rose initially but then dropped US$ 25/t in the second half of August to US$ 660-685/t fob, though they are expected to increase again by US$ 10/t in September. Delivered prices in SE Asia firmed slightly to US$ 690-695/t cfr. It is likely that billet prices will increase further if demand improves in Asia in the next few months, even though there are still problems in the MENA region. However, Iranian demand is expected to rise.

Products (Beams / Sections)

Aug

Sep*

E Asia import CFR $/t

860-870 860-870

Eur dom del €/t

625-655 630-665

Jap dom FOT ¥/kg N.America dom FOB $/s.ton

76-76

74-74

840-850 840-850

Products (Merchant Bar)

Aug

Sep*

China dom. Shanghai RMB/t

48104830

48304830

Products (Wire Rod) Blk sea export FOB $/t China dom. Shanghai RMB/t

Aug

Sep*

730-750 740-750 49405040

49905000

E Asia import CFR $/t

730-750 730-750

Eur dom del €/t

540-570 540-570

Eur import CIF S.Eur pt €/t

580-600 580-600

Jap dom FOT ¥/kg N.America dom FOB $/s.ton

75-75

73-73

930-950 930-950

*Prices listed are SBB forecasts

COMMODITY PLATE REVIEW Commodity plate prices in northern Europe have fallen back during August, and are currently at Eur 655-720/t (US$ 894-983/t). Demand has been fair among endusers, but destocking by stockholders over the summer shutdowns has reduced offtake. Prices in southern Europe have held steady during August, as construction activity remained weak. Prices in both European regions are ►

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Sep `11

SBB Global Market Outlook ► expected to improve slowly in the coming months provided production matches actual demand.

Graph 6

Plate $/t

Prices of plate in USA have dropped

by US$ 30-50/st during August to US$ 1000-1010/st (US$ 1102-1113/t).

Prices are expected to continue to fall further before possibly rebounding in line with coil price levels. However, the fall in plate prices will be much smaller than it has been for coils, but further imports could delay the price recovery.

Plate prices in SE Asia have firmed slightly during August as demand remained steady, and consumption should now increase. Chinese export prices have remained unchanged, so this material is staying competitive in the regional markets. Prices are now at US$ 720-730/t cfr for commodity plate, and should remain steady or slightly firmer in September. CIS plate prices slipped briefly during August as demand fell in some of their export markets, but rebounded and are now in the range US$ 750-810/t fob.

SCRAP AND RAW MATERIALS REVIEW Most US scrap prices slipped slightly during August, though levels were supported by strong export demand. Prices were unchanged in Asia during the month. European scrap prices were steady during August in Euros, but export prices slipped slightly in US Dollar terms. Most prices look likely to strengthen during September if demand continues to be firm, as material availability typically begins to slow in this season. However, European offtake may be lower if steel production declines. Prices for imports into Turkey slipped at the end of August but are expected to increase as buyers return to the market ►

“Plate prices in SE Asia have firmed slightly during August as demand remained steady, and consumption should now increase”

Plate Price Outlook Products

Aug

Sep*

China dom. Shanghai RMB/ t

48404870

48404870

740-810

750-810

N.Europe dom Ex-Works €/t 655-720

660-720

S.Europe dom Ex-Works €/t 600-660

620-660

Eur import CIF S.Eur pt €/t

590-650

600-650

E. Asia import CFR $/t

730-760

730-760

10001060

9801010

720-730

720-730

CIS export FOB $/t

N.America dom FOB $/s.ton China export FOB $/t

*Prices listed are SBB forecasts

►

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Page 9

Sep `11

SBB Global Market Outlook ► after Ramadan. Prices into Turkey may also rise as finished steel export business restarts and scrap inventories need to be rebuilt.

Graph 7

Scrap US$/t

Domestic shredded scrap prices in USA slipped by US$ 10/lt to US$ 455-460/lt during August. No 1 Bundles and Bushelling were also lower at US$ 510535/lt. US prices are expected to be firm in September while the strong export demand continues. Scrap prices in Asia finished August unchanged at US$ 495500/t cfr. Further increases are possible in September as demand is likely to improve, especially if Asian mills continue to raise their production. Lower availability from CIS will increase demand for US and European material, which could support domestic prices.

European price levels ended the month almost unchanged with domestic shredded scrap at Eur 310-340/t delivered (US$ 423-464/t). European export prices fell in August in dollar terms to US$ 433-443/t fob while Turkish import levels dropped by US$ 5/t during the month. They are expected to be slightly stronger in September if overseas demand remains firm.

Spot prices of Indian origin iron ore 63% material slipped slowly before rising in the second half of August to US$ 187-188/t cfr China. Chinese buyers had stayed out of the market early in August, but Graph 8 sentiment began to improve as buyers needed to restock for the rest of the Iron Ore US$/t year. Prices could now rise further during this month, as Chinese demand firms while Indian availability remains low due to bureaucratic and legal delays, though recent price increases have been comparatively small.

The October-December quarter iron ore contract price, where based on average index prices from June to August, will be just below the current quarter’s calculated contract level at almost US$ 174.00/dmt. Spot prices are likely to move upwards and may hold above this level for another quarter. Monthly or shorter-term pricing, already offered by some miners, is becoming increasingly accepted in the marketplace.

The spot price for coking coal has been falling in recent months and new contract levels, despite being slightly lower than before, will mean continuing high raw material costs for integrated steelmakers.

GLOBAL OVERVIEW OF PRODUCTION

“Further increases are possible in September as demand is likely to improve, especially if Asian mills continue to raise their production”

“Prices could now rise further during this month, as Chinese demand firms while Indian availability remains low due to bureaucratic and legal delays, though recent price increases have been comparatively small”

“The OctoberDecember quarter iron ore contract price, where based on average index prices from June to August, will be just below the current quarter’s calculated contract level”

The monthly production figures from World Steel Association show that July’s global production decreased by almost one million tonnes compared to June. ►

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Sep `11

SBB Global Market Outlook ► However, as June is a shorter month, there was a 4% decline on a daily basis in July. Chinese production fell by 1%, which is a 4.25% fall on a daily basis.

Actual production was higher in Other Europe, CIS, US, and South America but fell slightly in Asia.

Total world production in July was 127.5 million tonnes, which is 11.5% higher than July 2010 and equals 1.5 billion tonnes on an annualised basis. Global production in the first seven months of 2011 was 886.9 million tonnes, an 8.3% increase on 2010’s 7-month figure. China’s monthly output was 15.5% above that in July 2010. Production in EU27 increased by 5.9% compared to output a year ago, despite dropping over a million tonnes since June, while output in North America was 11% Crude Steel Output (thousand tonnes) higher. Production in Taiwan rose by 14% but increased by more May 2011 Jun 2011 Jul 2011 than 21% in South Korea 29,078 28,197 27,097 Europe compared with a year earlier.

16,335

15,858

14,579

- Other Europe

3,159

3,057

3,068

- CIS

9,584

9,282

9,450

N America

9,970

10,234

10,540

- USA

7,141

7,246

7,457

S America

4,427

4,140

4,297

Africa

1,193

1,191

1,207

Middle East

1,711

1,665

1,587

Asia

82,762

82,343

82,187

- China

60,245

59,932

59,300

638

571

561

128,341

127,477

- EU 27

Oceania World Total

129,778

Source: WSA

EU 27’s production was 14.6 million tonnes in July, which was more than 8% below June’s level.

Spain’s output decreased by 35% from June’s level, while France and Germany’s production fell by 12.4% and 5.5% respectively.

Italy produced almost the same as in June, despite the longer month.

In Other Europe, Turkey’s monthly output increased by more than 1%, and is above 2.85 million tonnes. The actual total CIS output was 2% above June’s level at 9.5 million tonnes.

USA’s production was nearly 3% higher than in June. South American output was 3.8% higher compared to the previous month’s levels, as Brazilian production increased to 3.1 million tonnes.

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China’s output of 59.3 million tonnes was 1% lower than in June, and a 4.25% slower daily rate. India’s monthly output was almost steady on a daily basis. Japan’s production was 2.5% higher in July at 9.1 million tonnes, while South Korean output was almost steady at 5.7 million tonnes.

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The Asian countries’ total production of 82.2 million tonnes was a fall of 0.2% from June, and a gain of 13% from July 2010. This region accounts for 64.5% of global production based on July’s figures.

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World output excluding China was 68.2 million tonnes in July, down from 68.4 million tonnes in June, and sharply higher than 63 million tonnes in July 2010.

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