Spot steel prices across the world remained under pressure
falling on Friday 1 July to under US$1000/t in the USA, under US$900/t in
Europe, and approached US$650/t out of China where steel mills have seen their
minimal profits fall over 60% so far this year; contrasting with raw material
suppliers.
However, sentiment appears to
be improving as China’s Manufacturing Purchasing Managers Index rose in June
for the first time in four months, indicating that manufacturing activity is
finally back on the rise after an unusually prolonged period of decline. The
last time the index was reported to have risen, Chinese spot prices rose
approximately US$165/t m/m and in line with the index, prices have been falling
ever since.
To the benefit of steel
consumption, and flat-rolled steel consumption in particular, it was
manufacturing output that rose most emphatically in the detailed results of the
PMI to a score of 52.8, compared to just 50.2 for the index overall. Not
surprisingly a key sub-index, the purchase quantity index, which refers to
manufacturers most imported raw materials such as steel, also rose for the
first time since February and at the fastest rate since June 2021.
Unfortunately for long
products suppliers in China, the business activity index for real estate and
residential services, an important subset of the booming construction index,
remained in negative territory last month. Real estate starts in June are
typically among the highest in the calendar but this seasonally-weighted
indicator suggests that they won’t have been quite so strong as usual,
compounding the gloom. So far this year, new real estate starts are 30.6% below
year-ago levels dragged down by the residential sector. It is because of the
erosion in steel construction that Chinese demand for steel overall is in
decline, unusually, and for a second consecutive year, which is even more
unusual. It happened previously in 2014 and 2015, before the recent 5-year boom
that ended in 2020.
API
plate
API plate prices in Europe
have been corrected to an extent following a drop in commodity plate pricing
over recent weeks. Currently, prices of commodity plate in Europe are
fluctuating at the level of €1200-1300/t ex-works. Availability of API plates
in Europe, in particular for sour grades, remains very tough, and delivery lead
times for non-sour plates are not less than 5 months and 6-7 months for sour
grades. Rystad expects API plate pricing will remain at these high levels for
the remainder of the year and will not follow the price reduction of commodity
steel due to the overall reduction in allocations of API plate. Therefore, the
premium for API plate over commodity grades, especially sour service, will
remain high. Moreover, commodity plate prices may start to increase again on
expected demand recovery due to a combination of restocking and restart of some
projects, pushing up API plate prices in turn. Additionally, rising energy
costs in Europe and strong demand for heavy plates from other industries will
also lend further support to API plate pricing in the region.
Export prices for API plate
from China have been slightly declining as part of a general downward price
trend in the Chinese steel market. The price decline is also being pushed by a
large decline in coking coal price as the government in China calls for a
reasonable trading price range executed in long-term coking coal contracts.
Despite some downbeat sentiments in the Chinese steel market, the API plate
sector will unlikely be impacted significantly as project demand is good and
API plate plants are in good booking. It is expected the buying interest for
Asian API plates to increase even more due to tight supply availability from
European mills. Additionally, Rystad Energy hears from market participants that
new export policy measures may come in place in order to support prices.