Short Range Outlook – June 2012
The uncertainty in the market is expected to continue for a while
The business scenarios in the global marketplace vary from one region to another depending on the economic situation in the different regions.
The long products market has been performing relatively better than the flat rolled market mainly due to better balance of supply and demand. However, the increased uncertainty in the EU and very slow demand has created a lot of doubts not only in the EU market but also in neighbouring markets, and has kept customers from placing new orders while forcing them to reduce their inventories even lower as of the second week of May. Furthermore, the sharp drop of the euro has been putting a lot of pressure on US dollar-denominated prices.
Such uncertainty is expected to continue for a while as Greece will hold new elections and the outcome is unknown. Those most concerned are the steel buyers who seem to have decided not to buy until the uncertainty goes away.
On the other hand, demand in almost all other areas remains reasonable, and customers have come back to the market after price adjustments. That said, the North African market still lacks stability due to political issues and elections, which are expected to be cleared by the fourth quarter. However, the Middle East and the Persian Gulf are the most stable regions in terms of demand and growth. Demand in the Central and South American markets remains strong, and the Chinese and Far Eastern markets are also showing relatively good performances. In the US market prices were relatively stable, but there may be a further impact due to weaker scrap prices and stronger US Dollar value.
Steel continues to be produced, shipped and consumed everyday despite all the uncertainties surrounding the market, while the automotive, agriculture and mining industries are still driving the demand for steel in the global marketplace.
Competition seems to be strong in the EU and the North American markets as the mills are looking for the best opportunities, particularly on delivery time and price. However, competition appears to be less strong in the Middle East, Asia and the Far East due to better demand. It needs to be noted that the Chinese currency has been revalued against almost all currencies except the US dollar and Yen.
Outlook for June:
The current uncertain and unstable status of the market is expected to be rebalanced after price adjustments. That said, in the very short term we may still observe a low volume of trade due to uncertain currency exchange rates, the holiday season and Ramadan.
Customers are expected to come back into the market after price adjustments and the second half of 2012 is expected to bring the demand back into the global market.