- This week Fastmarkets’ analysts and price reporters shared their views and recent findings in a webinar revealing some distinct fundamental tensions for steel, refining alloys and, of course, steelmaking raw materials such as iron ore.
- While the outlook for chrome and manganese ores and alloys is balanced, as far as market participants are concerned - capacity cutbacks are perceived to be no more extreme than the demand erosion taking place - iron ore is going through more of a perfect storm. Essentially, key buyers, the large integrated steel mills, are not inclined to curb purchasing so even as supply pressures persist and may spread, stocks continue to dwindle, which is supporting prices; not only for dwindling stock but fresh tonnages.
- Buyers of refining alloys, however, especially those associated with stainless steels production such as chrome, can be more flexible and can continue to reduce production, maintain inventories and avoid bidding prices higher. This is especially important today when conversion margins for stainless steel producers are the lowest we have recorded.
- Carbon steel producers may not be losing money today but they are, at best, breakeven after having been marginally profitable at the start of the year when their output, especially of hot-rolled coil (HRC), was prolific, rising by 10% year on year. We were asked in our webinar about how long this situation can continue and the jury is out. There is precedence for voluntary cutbacks, such as during the first few months of 2016 - a time when HRC and rebar margins were more than 100 yuan ($14) per tonne below breakeven. In our view, cutbacks are unlikely in the short term until such a time when margins return to those consistently negative levels. To the same extent that we underestimate the strength in iron ore pricing to come, so we too overestimate the seasonal gains in finished and semi-finished steel production to come.
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