CRU: Demand weakness continues to weigh on global sheet markets

US HR coil prices have now fallen for the tenth week in a row, declining by $47 per short ton (st) in the latest week to $699/st. CR coil prices fell by $23/st to $1,047/st, while HDG coil base prices were down by $6/st at $984/st.

Yet more large-volume, low-priced deals for HR coil were done last week, driven by an ongoing imbalance between supply and demand. In terms of demand, market participants report that while buying from the automotive sector is still decent, mills that are more exposed to other sectors like agriculture or construction are mulling a reduction in shifts. This end-use demand slowdown is impacting apparent demand by extension, as many buyers are also now waiting for prices to fall even further. This may result in a drop in service center inventory levels as they limit buys for both spot and contracts, which may then set the market up for price support later in the year once buyers decide they need to build stocks again.

For now, though, prices are unlikely to rise over the very near term. Service center inventory data collected by Steel Market Update show that not only have inventory levels built steadily on a y/y basis every month so far in 2024, but daily shipping rates from service centers have also fallen every month. Until there is a need to restock or sheet output is reduced on the mill level, prices will find little in terms of support. The one variable that could also swing price direction is the ongoing strike at an ArcelorMittal facility in Mexico, which could threaten supply chains were it to drag on for an extended period.

Europe

European sheet market weakness continued this week due to low demand, with German sheet prices falling by €5–13 per metric ton (mt) w/w and Italian sheet prices dropping by €5–6/mt w/w across all sheet products. German and Italian HR coils were assessed at €629/mt and €635/mt, respectively. Although there was a modest round of restocking 4–6 weeks ago, this seems to be over now.

The new EU safeguard measure that is set to be introduced at the start of the new quota period on July 1 imposes a 15% cap on six countries in the ‘other countries’ quota category. The countries included are Japan, Vietnam, Taiwan, Egypt, Australia, and Brazil. This restriction is likely to reduce the overall utilization rate of the ‘other countries’ quota by around 25%. This would suggest an opportunity for EU producers and regions with their own country-specific quotas to replace the volumes that will be lost from the ‘other countries’ supply.

Turkey, for example, has a country-specific quota that has rarely been filled. However, Turkey will not be an option in July because a lot of material has already been booked in Q2’24, according to market contacts. Turkey is expected to be ready to supply material again in August.

Some EU mills have recently increased offers for HR coil by €20–30/mt in response to the changes in the safeguard measures, which mean that buyers will have to pay additional duties to clear imported material on July 1. However, the latest offers seem to have been met with resistance from buyers, as there has been no change in end-user demand, which remains sluggish.

China

Domestic Chinese sheet prices fell by RMB10-20/mt w/w. End-users were reluctant to purchase high-priced material amid flood warnings and adverse weather conditions in multiple regions which have hampered construction and transportation. As the traditional demand off-season approaches, and without significant macroeconomic improvements, market sentiment has turned bearish and prompted cautiousness in the futures and spot markets. However, the auto sector’s performance remains resilient. The latest data from the China Association of Automobile Manufacturing and China Auto Dealers Association highlighted better-than-expected statistics in May. Auto sales saw slight increases both m/m and y/y, accompanied by a notable decrease in the auto inventory index. This indicates continuous robustness in the automobile sector, potentially supporting sheet demand during the summer lull.

Asia

Prices of imported sheet products in Asia decreased this week due to weak demand and strong supply.

For HR coil SAE1006, a deal for Chinese material was heard to have been concluded at $540/mt CFR Vietnam for August shipment. General offers during the week were at $545-550/mt CFR Vietnam.

Formosa Ha Tinh Steel announced its offers last week at ~$560-572/mt CFR Vietnam to their domestic buyers. The new price is ~$10/mt lower than the last offer.

CRU assessed HR coil at $540/mt CFR Far East, a decrease of $10/mt w/w. CR coil and HDG coil prices were down by $10/mt w/w to $680/mt and $700/mt, respectively.

India

Indian HR coil prices fell by INR200–400/mt ($2–5/mt) w/w, although there was more support for downstream sheet products. Spot market activity was slow for HR coil as most buyers had sufficient stocks and purchased only to meet immediate needs. Several contacts suggest that the market is awaiting more clarity on the policy stance of the newly formed government. Meanwhile, prices of downstream sheet products have found support from reduced supply as several cold rolling and coating mills have gone under maintenance, tightening the market.

Exports slowed further last week as buyers in the Middle East stepped out of the market due to Eid Holidays, while European inquiries were discouraging for exporters. In fact, several fresh import deals were reported due to a recent reduction in Chinese price offers, which have exerted further downward pressure on Indian prices. The latest assessed Indian HR coil export price was down by $5/mt w/w to $560/mt FOB.

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