In August and beginning of September a lot of East Asian companies actively purchased flat steel from all possible sources, figuring on recovery of regional and global economy in the fourth quarter of current year. However instead of expected revival came stagnation and the products taken beforehand became dead at stocks. In opinion of a number of experts those stocks in the region are so large in comparison with real consumption of flat products that new purchases may not be till the end of the year and only in January the market may wake up to life.
The markets of Korea and Vietnam seem the most oversupplied. In accordance with Korean sources, real deals for hot rolled coils in the country are made approximately for $630-670 per ton from a steel center, while sale prices of the leading local companies taking into account high rate of the local currency, exceed $770 per ton EXW. Hot rolled steel at local Vietnamese market became cheaper to less than $570 per ton, and several traders try to reexport excessive quantities to the neighboring countries.
Chinese export of flat products which reached maximum in June, was being constantly decreasing since then. Quotations however remain at quite high level. Cost of merchant HRC is indicated by Chinese exporters within $590-610 per ton FOB, and heavy plate is offered to Korea for $610-620 per ton FOB. However, Chinese hot rolled steel does not find demand in India and East Asia even while price drop to $600-610 per ton CFR. Korean and Taiwanese exporters cannot boast their sales as well. They weakened their November HRC prices to $620-640 per ton FOB. The majority of consumers are not interested in new purchases and expecting for further decrease of products’ cost.
However, Chinese companies are not interested much in export now. Local market prices are higher: hot rolled coil price in the majority of cities in the East of the country is steadily exceeds $631 per ton from a steel center. And the demand within China is higher than outside. Many companies reported they have their order books filled up till the end of the year.
In the same time competition between Korean steelmakers strengthened both in local and international markets. Steel production in Korea this year grew essentially compared to the year before, while consumption increased far less. The players feel free to dump prices. Japanese flat steel suppliers became unnecessary as a result. No leading exporter of hot rolled coils succeeded in signing contract with Korean consumers for Q4. There were merely no imports in October. Cold rolling mills in Korea operate 60-70% loaded because of shortage of orders. Negotiations about Japanese heavy plate supplies to Korean shipbuilding enterprises stopped as well.
Flat steel prices in the international market have lined up recently. Price of hot rolled coils in Asia, Middle East, Europe and even US is approximately around the same level, which is a little bit over $600 per ton CFR. Interregional trade decreases as price difference does not cover transportation costs. Simultaneously, nobody tries to force sales by price drop, understanding that this is useless. Such forced stability is likely to last till the consumers start to form stocks for the next year. This can happen in late-November – early-December, but some experts (in particular from World Steel Dynamics) consider lethargy in the market will last till January.