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Steel Price Reductions in China Unnerve the Emerging Steel Markets

Date: 2019-01-04
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The situation in the Brazilian steel market is virtually unchanged, from that reported in November. Business confidence is low. Domestic demand is weak, with few transactions being concluded. Traders are carrying stock that is surplus to current requirements - much of which was purchased at prices higher than those pertaining today. Meanwhile, local producers expect that the tough business conditions will spill over into, at least, the first quarter of 2019.

The business environment, in the Russian Federation, is slow. Distributors are allowing inventories to run down, in order to free working capital and minimise potential losses, as current demand reduces ahead of the eight-day New Year/Orthodox Christmas break. Construction demand is tepid, and is forecast to decrease with the onset of inhospitable winter weather conditions.

The Indian trading climate is subdued. Steel usage is weak for seasonal reasons. Domestic steelmakers are considering a price rise in January, but buyers believe that their expectations are unrealistic. Local construction firms are reluctant to purchase more steel than they need to meet theirnear-term requirements. Third country flat product import offers are available, but buyers show little interest.

With winter approaching, Chinese steelmakers have started to redirect material to the country’s eastern and southern provinces, to counter the slowdown in the northern regions. Restocking is expected to pick up after the Lunar New Year holidays (from February 4 to 10), at the earliest, assuming no unforeseen procurement surge beforehand.

Purchasing activity is limited, in Ukraine. Stockists are reluctant to place new orders, at present, due to the onset of the winter trading period. Despite this, domestic steelmakers are keen to lift selling figures to protect margins, citing rising steelmaking raw material costs. The local association of metal producers, Metallurgprom, reported that finished steel production, in November 2018, totalled 1.47 million tonnes – down 3.3 percent, month-on-month.

In Turkey, business is slow in the steel market and local distributors’ margins are being squeezed. The majority of these firms plan to persevere with conservative inventory levels over the January-February trading period. Meanwhile, end-user groups plan to closely monitor the price premium charged by the local mills, relative to the cost of imports, before deciding where to buy. Export business opportunities are poor, at present.

Price volatility is undermining market sentiment, in the United Arab Emirates. Minimal trade was conducted during the period surveyed. Competition between service centres is fierce for the available business. End-users are still waiting for evidence of price stability.

The outlook for the South African steel market is unchanged. Service centres are keeping inventories steady and only buying for orders already on their books. Sales activity is sluggish to many steel consuming segments. The construction sector continues to operate with limited public and private finance.

Trading conditions in Mexico are quite slow. Service centres are delaying purchases until January to assess how demand develops. MEPS notes little appetite for buying steel, at present. Construction activity in the public sector is at a standstill, currently, as the market awaits government decisions on proposed new investments.

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