March 11th jolted with a rude shock of earthquake measuring 8.9 on the Richter scale culminating in 13 foot high Tsunami affecting the Japanese coast.
Apart from the catastrophic dimensions on the inhabitation and human lives it will certainly have a moving impact on the steel and raw material market. It is learnt that the Tsunami has flooded works of most of the steel plants on the Pacific coast. Prominent names figuring are JFE, Nippon Steel, Sumitomo Corp etc. The raw material and scrap storage yards along with some of the finishing lines directly came in line of the Tsunami bringing the operation to grinding halt.
It is imperative to delve in the implications this natural calamity on the steel market. The tremors of quake will certainly be felt in the fore corners of global steel market.
Japan being a major importer of iron ore, coke and scrap will be shut out for immediate shipments. As most of the ports will remain inoperative there is likely hood of shortfall in demand leading to price drop in the spot iron ore, scrap and coke prices. Although the Q2 contractual prices for iron ore and coke has just been finalized in Japan the execution of these contractual obligations will certainly be cause for concern. Iron ore prices already sulking on the Chinese drop in demand portends to depress further as Japanese demand will wane.
Likewise the scrap prices which had just shown token of revival on Turkish buying is likely to slip.
In finished steel however the dynamics is likely to be the other way around since Japan being a major supplier in SE Asia and Far East will be shut off leading to severe curtailment of supply. The void left will be leveraged by mills from China, South Korea and CIS who would be more than eager to divert volumes in this region making the best of the situation. Hence the prices of flat and long products will see an upswing immediately providing mainstay to the flat market which commenced plummeting last week after a marathon run for the last 3 months.
The long product prices which in any case have remained subdued for the last couple of months this might just prove to be the savior.
( Source: www.steelguru.com )