/Rusmet.ru, Victor Tarnavskiy/ The prices for steel products from CIS in Middle East keep falling in recent weeks. Actually, they have returned to the early March level. In particular, semis with the delivery in June are offered at $480-490 per ton FOB; wire rod and rebar prices fell to $530-540 per ton FOB. The Ilyich Steel Works of Mariupol keep decreasing the prices and offers HRC at $590 per ton FOB and less. Other Ukrainian and Russian mills offer similar products at $620-665 per ton FOB. However, the traders are looking for the buyers at $600 per ton CFR the Gulf and less.
Certainly, the lowest prices are offered by trading companies which try to unload the stockpiles and ports. The manufacturers are also very flexible today. In March-Apr. steel output in Ukraine almost reached 3 mio tons per month, i.e. the capacities load exceeded 80% (excl. Makeevsky mill, where the furnaces were stopped in 2008 and did not return to work). Obviously, the production volume significantly exceeded the real demand.
Despite graduate decrease of the prices, which lasts for the sixth week at a run in long products market and for the fourth week in the HRC market, this policy almost does not influence the demand. The crisis of the autumn of 2008 is repeating, but in lower scale. As in 2008, the consumers keep waiting policy and count on the prices decrease continuation. According to the traders, there were only few deals concluded in recent four or five weeks. Mostly it was the deals on small amounts of products. The biggest importers are not active.
Due to the overproduction and excessive stockpiles, in early spring the consumers and distributors in Middle East countries today have significant stockpiles. But, unlike 2008, real consumption volumes are rather high and sometimes exceed the before-crisis level. Despite steel and rolled steel output increase in Middle East importing countries, it will be impossible to satisfy the market needs in full without purchases.
The main question is for how long the Middle Ease buyers are supplied with existing stockpiles. Last year in similar situation the rally started in June-July. Then the demand weakened and increased as late as in early 2010. By all appearances this year the situation will be more positive. The purchases will increase in June. Besides, the rally in Middle East market is possible.
Anyway the demand stimulating by means of long-term prices decrees is prospectless. On the contrary, the quotations stabilization can turn to be the best solution.