Q3 2019 Steel Report Overview

Global steel prices decreased in Q2 given weakening demand and a continued drop in the US, correcting from the tariff-induced speculation rally last year. In the US, mills are capitalizing on a shrinking import market to announce ambitious capacity expansion projects even though spot pricing has tanked recently to lows not seen since 2016. In Europe, the market remains weak with near continuous, albeit slow, price erosion and quiet with the summer slowdown. In China, trade tensions continue to dominate market sentiment and 232’s effect on the export market has started to manifest in a meaningful way, with China’s steel exports down 22.8% YoY.

  • Although many believed US HRC had bottomed out in February, prices have continued to fall, recording a 24% decline in the last three months alone. Prices have begun to rebound slightly as they touch a natural market inflection point near the cost of production.
  • EU Flats is the weakest market globally in 2019, with another 6.5% decline in the last three months and strong downward pressure from rising imports. A significant price recovery is unlikely in the short term as Safeguard quotas have had a limited effect on reducing imports. Buyers were relieved to hear that the merger of Tata and TK was formally blocked; however, elevated iron ore prices and announced production cuts from major mills will apply upward pressure.
  • Chinese flats decreased 4.9% since April as US-CN trade relations broke down and economic uncertainty persisted. Recent government initiatives to increase access to funding for construction projects will help stimulate demand in the short term, but without a solution to China’s rapidly declining export market, prices are expected to trend further downwards in Q4.
  • Iron ore prices have continued to rise following the vale dam incident earlier this year, notching another 17% increase in Q2 2019. The scrap markets in US and EU have been reflecting the weakness observed in the coil market, with a decline of 21% and 6%, respectively.

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

The Steel Team at Applied Value


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