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March, 21st 2018

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Weekly Steel

Issue12-18 20 Mar 2018

Kallanish Steel Weekly:Billet market strengthens further, premium sets new record

The billet market continues to be particularly strong. CIS suppliers have consolidated their export sales at some $550/tonne fob Black Sea supported by the relatively small availability and the continued lack of strong competition from other suppliers.

The strength in the billet market is also highlighting the good profitability overall for steelmakers, as the spread between billet, iron ore and scrap has moved up further.

At $550/t fob, Black Sea billet prices are now some $150/t above those seen in March 2017. Last week a further $5/t increase was confirmed to reach a new record level.

While iron ore prices during the week stabilised at below $70/t cfr China and scrap levels in Turkey remained stable, the spread between billet and the two main raw materials increased further. This indicates that steelmakers continue to have the upper hand in the market. Last week CIS billet was trading at a $480/t premium compared with Chinese iron ore and at a $170/t premium compared with Turkish scrap. In mid-March 2017 the spread was $317/t with iron ore and $103/t with scrap. The spread between CIS billets and Chinese iron ore stood at below $275/t In March 2016.


Issue11-18 13 Mar 2018

Kallanish Steel Weekly: Seaborne iron ore prices wobble on China uncertainty

Seaborne iron ore prices in China slumped below $70/tonne on Friday for the first time since 15 December. News of potential output restrictions in northern China are dragging down iron ore more than they are supporting steel prices. The fall in iron ore prices came as the market continued last week to witness increasing uncertainty due to the official signing by US President Donald Trump of the import tariffs affecting steel and aluminium.

A rally has taken the iron ore price above $78/t cfr Qingdao, having jumped some $20/t since end of October 2017. Last week the market turned significantly as it became clear that iron ore in China would not receive any support from steel prices in the immediate future.

Following the correction of iron ore prices, the market is now trading at almost $20/t below the levels registered at the beginning of March 2017. In 2017 the market reached its peak at the end of February before starting a steep fall that continued until mid-June, taking the price from above $90/t cfr Qingdao to some $55/t.

The iron ore price correction in China last week did not impact other raw material prices directly. On the contrary, scrap reached a new three-and-a-half year record high last week and billet prices also increased. Nevertheless it is expected that if the weakness in the iron ore market persists, it will force scrap and billet prices to slow down globally also. Market observers, for example, noted that the billet market bubble could well burst sooner rather than later.

Issue10-18 06 Mar 2018

Kallanish Steel Weekly: Section 232 chaos starts as market continues strong

The proposal by President Trump to slap a 25% tariff on all steel products imported in the US by all countries has raised concerns in an otherwise strong global steel market. It is too soon to understand the actual impact of such a proposal on the global markets. it is interesting to note however that the decision is set to come at a time when the sector continues to enjoy a good run, both in terms of prices and margins for steelmakers.

Last week iron ore held firmly at above $78/tonne cfr Qingdao, continuing the recovery initiated at the end of October 2017. The iron ore price remains some $10 below the levels registered in March 2017, but market sentiment is good. Industry observers in China are noticing that steel demand is not picking up as much as anticipated, indicating a possible drop in prices. Nevertheless for the moment the markets are holding firm and awaiting more clarity.

Issue 9-18 27 Feb 2018

Kallanish Steel Weekly: US 232 move holds market hostage

The global market is collectively holding its breath while US President Donald Trump carefully and calmly considers his response to the US Department of Commerce’s 232 investigation. The department’s preliminary recommendation was either a blanket tariff of 24% on every country and every product, a 53% tariff on 12 countries with 100% 2017 quotas on the rest, or 63% 2017 quotas across the board.

Rest assured, President Trump is putting more thought into this than he would a 3 AM tweet. After all, there’s a lot at stake.

Then-candidate Trump ran on a platform of jobs, jobs, jobs in 2016. He and Vice President Mike Pence admitted in a listening session with Congress earlier this month that the 232 national security investigation was mostly about national security, but also mostly about retaining and breeding American manufacturing jobs.