• US domestic prices for hot-rolled coil have moved down in line with our expectations, averaging $508 per tonne in July compared with our forecast price of $519 per tonne. While we are forecasting coil price increases in August, we have revised our expectations downward. Although steelmakers are reporting improving demand from the automotive sector in particular, the rapid return of previously idled capacity in recent weeks, together with a lack of support from several major mills, will prevent a widespread acceptance of recently announced mill price rises of $44 per tonne.
• As we expected, European flat steel prices hit a floor in June and started to rise again in July. European producers raised their coil offers by €30-40 ($35-47) per tonne in late June and, although they did not manage to push through these increases in full, HRC prices in Northern and Southern Europe rose by 2.6% and 4.8% month on month respectively. HRC prices came slightly below our forecasts in July, and we believe that the pace of increases will remain moderate in the second half of 2020. With a traditional slowdown of activity in August, prices are likely to remain stable, rising when buyers return to place new orders in late August-September. But with sufficient inventory levels in the distribution chain, and a still-fragile recovery in end-user demand, we expect to see a steady uptrend without any significant spikes that will continue into 2021.
• HRC prices in Eastern China surged by 5.4% month on month in July, with a similar rise in export price levels. Industrial activity in China continued to improve, with motor vehicle production rising by nearly 20% year-on-year in May and June, and a rise in white goods output. A booming construction sector has been driving demand for heavy machinery and production of excavators, and supporting demand for coil and plate products.
• Rebar prices in Eastern China slipped by 0.3% month on month in July. Heavy rains caused floods along the Yangtze River, reducing demand from the construction sector and leading to a rise in stock levels at warehouses and mills. But the demand outlook for rebar remains strong, and new construction starts rose year-on-year in May and June. The focus of the Chinese authorities on infrastructure projects will extend the demand for rebar and other long steel products this year, which had been on course to fall further than we predicted because of the effects of Covid-19.
• Turkish export rebar prices rose in the second half of the month, following increases in import scrap prices. Demand from the main export markets was subdued through the month, but producers introduced higher asking prices in order to avoid a further decline in their already-squeezed margins. The upward trend in seaborne steel and raw material prices should help Turkish mills to push prices higher in the next few months. A change in EU safeguard import rules and a fall in US rebar prices, however, are limiting export opportunities for Turkish producers, forcing them to look for new markets and to compete with low-cost suppliers.
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