Q2 2019 Steel Report Overview

NA steel prices have finally recovered to pre-Section 232 levels, and have largely stabilized after bottoming out in February. EU flat prices also decreased, continuing a downward trend throughout Q1. Chinese prices, however, increased QoQ, driven by global infrastructure demand and Chinese environmental restrictions.

  • After a turbulent year in the US steel market and reaching a floor of $746/MT in February, US flat prices saw a slight uptick into Q2. Prices are projected to continue a relatively flat trajectory, although any political and/or trade changes will drive market pricing.
  • Similarly, EU flat prices continued downwards throughout Q1, but leveled off with the instatement of permanent safeguard measures. In addition, supply consolidation and input costs are expected to create a price floor for any falling market sentiment.
  • The spread between EU and China prices has disappeared, with HRC prices in both regions coming in at 514 EUR/MT for the month of March. This is due to a 5% decrease in EU prices QoQ and an 8% increase in CN prices QoQ following two quarters of continuous decreases. The turnaround is thought to be driven by environmental policies limiting output in China, which has helped to bridge the gap.
  • Q1 saw mixed results for raw material prices, with iron ore jumping 24% due to the Vale Dam collapse in January, coking coal decreasing by 7%, and natural gas by dropping by 26%. Both US and EU scrap took a dip in early Q1 2019, though a rebound in the EU price later in the quarter resulted in no net change QoQ.
  • In the wake of Section 232, import levels have started to decline at a rapid rate in the US – down by 14.4% LTM vs. the same period last year. Recently implemented tariffs in the EU have yet to see material effect, with imports showing a 9.2% increase over LTM, largely driven by imports from European countries outside of the EU, and Russia. Overall, Chinese exports decreased 1.8% YoY, mostly attributable to lower exports to East and South Asia.

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

The Steel Team at Applied Value

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