It is reported that global steel market is in pessimistic mood recently. The most manufacturers forecast weak demand for steel products in summer and the decrease at least till August. However, Japanese steel manufacturers despite these expectations did not reject the idea of the prices increase in the Q3.
Integrated plants offer HRC to Korean CR steel manufacturers at about USD 850 per tonne FOB, which is up by USD 100 on the Q2. According to the manufacturers the prices for plate for ship building is to rise similarly. The manufacturers try to raise it up to USD 900 per tonne FOB.
In domestic market Nippon Steel and JFE Steel also announce the necessity of the prices increase. Thus Toyota Corporation is offered to accept the 25% increase of CR sheet for automotive for April to September period as compared with the previous half year, to JPY 100,000 including delivery.
These prices still look unreasonable form current market situation point of view. Chinese companies today export HRC to Korea and South East Asia at USD 560 to USD 600 per tonne FOB. Korean manufacturers had to cut the prices for similar products to USD 620 to USD 640 per tonne FOB. Some exporters sell the stockpiles even at USD 560 to USD 580 per tonne FOB.
According to analysts, even Japanese Tokyo Steel Manufacturing can decrease its prices in July by JPY 3,000 to JPY 5,000 per tonne for the first time in recent six months. Certainly, integrated manufacturers of flat steel have to respond for raw materials prices growth. Coking coal in the Q3 will grow by 12.5% as compared with April to June 2010 period.
As per the Far East sources, the hopes of Japanese manufacturers for the increase in July are not that groundless. The demand for steel products is rather high in the region, and it is to increase in the second half year. In particular, Korean ship building companies got many orders in recent months. Automotive sector is also expanding the output. Steel products consumption in South East Asia is also growing, first of all in Vietnam, Indonesia, and Thailand.
Asian analysts are rater optimistic about China as well. The local market is undergoing the decrease caused by the tightening of State finance policy and loans cutting. However, GDP growth rates in the Q2 and Q3 will reach 8% to 10%. The demand of steel products is to recover accordingly. Imported iron ore prices will affect steel products market as well. In recent two weeks iron ore spot market stabilized and the prices even grew by USD 5 to USD 7 per tonne as compared with the minimal figures in late May. Thus we can expect the rolled steel prices in Chinese market will increase soon and export at dumping prices will stop.
But the expectations of Japanese analysts can fail. The gap between the quotations they announce and the current market level is very large. Besides, Chinese Ministry of finance said that it would not cancel or reduce VAT for steel exporters, so that the export volumes will remain rather high. The increase of the prices in July, if it happens, will touch only deficit high quality products. Commercial steel prices will slightly increase.