In this week, the Korean re rollers will visit Japan, and make negotiations on hot rolled steel coils for June/July shipment with the Japanese mills. Under the situation that hot coil customers of each country are voicing price down by USD 30 to 40 in next quarter, attention is drawn to see whether the Japanese mills will be able to roll back requirement for price down without rushing into selling.
Hot coil prices are said to have dropped by a little over USD 10 since the beginning of May. In China as well, Baoshan Iron & Steel left its domestic prices unchanged for June shipment but Wuhan Iron & Steel and Anshan Iron & Steel decreased their prices by CNY 80 (USD 13) and CNY 70 (USD 11) respectively. China’s offer prices for Korea were to be raised by USD 30 to USD 40 for July shipment until recently but it is reported that the mills are offering no price change or decrease by about USD 10 lately.
Customers are voicing for hot coil prices to be dropped but there seems no solid evidence. Simply, the reasons of a resurgence of European financial turmoil, usual demand decrease due to the off season, the offensive of the Russian mills and so on are mentioned but any of them seems only to be appealing psychological anxiety.
Demand for hot coils is not decreasing from the past years. Demand for containers is strong. The top ranked container manufacturers in China have usually purchased 150 to 160 thousand tons a month from the domestic mills and overseas mills including Japan. However, in case of June, they are said to have expanded to purchase hot coils to 200 thousand tons. So, it shows that demand for containers is increasing and movement of logistics by a container is strong.
Furthermore, in that country, the government has decided to pay subsidy of about CNY 26.5 billion (CNY 340 billion to diffuse energy saving electrical home appliances. At present, depressed demand for air conditioners is recovering, and because of this, there is a possibility for steel products like non-oriented electrical steel sheets and cold-rolled steel sheets made from hot coils to be revived. The offensive of the Russian mills is observed to be temporal by a source of the industry because inventories produced during delay of ice-out of the Black Sea flowed to overseas.
Not only in Japan but also in China and Korea, electricity charges are raised in next quarter. Price hike of raw materials for a blast furnace from this quarter is expected in those countries as well as in Japan. For that reason, production costs of the Chinese mills will rise, and the situation is difficult for the mills to cut their prices largely. The Japanese mills also seem to have no room to decrease their prices. In Korea, there is information that the electric furnace mills are studying to cut their production due to increase of electricity charges. If so, supply and demand of hot coils in Korea are likely to go to improvement.
Depending on the exchange rate of the won, there is a possibility that the Japanese mills will skip their export to the next chance because they are no need to fill their rolling schedule of June immediately.
Ontrend Industrial Limited, member of BERMET MANAGEMENT AS in Estona, Tallinn.starts from 2007.Bermet established since 1996,We have more than 15years operating history in the field of steel business and acts today in China,Czech Republic and Estonia. Its main products are ERW Steel Pipe ,Steel Section,Steel Coils,Steel Wire ,Tinplate & Further-Processed steel products .