LOndon, 22 December 2009

Despite a flood of announcements from the US mills scheduling increases for the first quarter 2010, during recent negotiations, some suppliers have lifted strip mill product values, others have lowered them and a number have left them unchanged. It appears that producers are looking to fill their December order books and then aim for rises in January - probably achieving around $US20 per ton.

However, there are no indications that demand will be any healthier at the start of next year. Market players are still waiting for the government's "stimulus package" to really kick in. There are very few foreign offers.

The Canadian mills are using the month of December to clear their delivery backlogs so they can start 2010 with a clean sheet. Many have now closed their December order books and are looking to start to pencil in January business. The producers are attempting to signal that the price erosion that has taken place during the final quarter is over. Increases are being announced for January in the expectation of a good balance between available capacity and demand. However, the value of the Canadian dollar remains a concern to manufacturing competitiveness, particularly in central Canada.

Local prices have continued to rally in China over the last few weeks although, more recently, this upward momentum had slowed, or even reversed slightly. Bullish government statements on the economy have helped to maintain market sentiment. Nonetheless, there is still a degree of caution regarding the possibility of overcapacity in the future. The manufacturing sector continues to grow, with export business being particularly healthy.

Demand recovery in Japan is not solid so buyers and steelmakers are proceeding carefully. Tokyo Steel will cut list prices for most products in January, on slow consumption due to the slump in private construction investment and government spending on public works. Quayside stocks of imported flat products, as end October, rose by 8 percent, after reaching an all time low in September. Export business continues to expand but the rapidly appreciating Yen could damage this situation.

The South Korean economy is moving out of recession, enabling the steel producers to benefit from the growing demand from key consumers such as auto and appliance makers. However, new capacity coming on stream will ensure that the market is not under supplied.

Taiwan's CSC has issued a statement covering list prices for January/February business. In order to combat cheap imports, the company will cut domestic values for cold rolled coil, hot dipped galvanised coil and plate. Other products will not be changed. Downstream customers are reporting weak order books. The market is expected to stay quiet until after the Chinese New Year holidays in February.

Polish demand for flat products remains muted. As anticipated last month, a deficit of any significant activity has placed significant downward pressure on prices. Market players in the Czech/Slovak countries report very low levels of business. Distributors only want to purchase small quantities of specific grades/sizes to fill holes in their inventories, which are being kept at minimum levels because final demand is so poor. Resale values have fallen further. Producers are pressing for higher basis figures in January but we have no reports of deals being concluded so far.

Although we have noted some minor downward corrections in Western Europe over the last month, market prices are starting to stabilise in most parts of the region. The import threat from third country suppliers appears to have abated. The domestic mills would like to impose rises for the first quarter 2010 but the success of this initiative is not guaranteed as final consumption remains weak. Service centres are determined to keep their inventories down to match the reduction in demand. Inadequate credit insurance continues to be a major issue in many countries.

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