Q1 2019 Steel Report Overview

NA steel prices continued to plunge in Q4 2018 and have now reached pre-tariff levels, correcting from the inflated run-up during 2018. Chinese and European prices have also seen downward movement, posting 15% and 6% Q4 reductions, respectively. Overall expectations are for a weak Q1 2019 as global demand & economic uncertainty are continuing to drag prices down. As section 232 tariffs continue in the US, the European Commission has formally ratified (as of January 2019) a 25% safe guard tariff on steel products that exceed import quotas established in the investigation process.

  • US Flat prices plummeted 13% in Q4 and have now reached pre-232 price levels as the market continues to correct. US prices are projected to see additional decreases going into 2019 as prices re-align globally and economic uncertainty hits demand.
  • EU flat prices decreased 6% in Q4 2018 as inventories increased and buyers awaited decisions on newly announced safeguard tariffs. Economic driven demand factors will keep EU prices lower in H1 ‘19 but supply consolidation and safeguard measures will maintain a floor.
  • China flats prices saw a major decline of over 11% in Q4 2018 before leveling off slightly in December. Trade uncertainty coupled with falling demand will likely put pressure on lower Chinese prices in H1 2019.
  • Q4 saw an increase for most raw material prices, largely on account of growing uncertainty around Chinese production. 2019 US HR production costs are projected to increase by $13/MT for mini-mills and by $1/MT for integrated mills in the US. EU HR steel integrated production costs are projected to decrease by €18/MT in 2019 due to falling coking coal and iron ore prices.
  • Despite the sweeping 25% tariffs imposed by section 232, US total steel imports in 2018 only reduced by 8%, impacting non-EU European countries (mostly Russia) and Asia (mostly Korea). Steel cost increases for buyers in 2018/2019 are a significant impact to company EBIT performance, and these margin swings have forced buyers to react & re-evaluate supply chain flexibility, optimization and buying practices.

As always, we look forward to hearing your questions and comments.

The Steel Team at Applied Value

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