Challenging Trading Conditions Persist in the Emerging Steel Markets

Downstream demand for finished steel products is tepid, in Brazil. Steel production is, so far, unaffected by the restriction imposed on output from Vale’s iron ore mines. Stockists are adamant that any move by domestic steel suppliers to pursue price growth would be counterproductive and stifle what little buying interest exists. Meanwhile, the Instituto Nacional dos Distribuidores de A？o (Inda) reports that, in January 2019, domestic flat rolled finished steel sales totalled 228,600 tonnes – down 19.5 percent, compared with last year’s figure. The association is projecting that distributor and service centre sales will be stable at best, this month.

Procurement tonnages in the Russian Federation are tepid. Price conscious steel traders highlight that current transaction values reflect the price demands of their suppliers rather than market fundamentals. The situation has been exacerbated by a rebound in prices for export quotations. Distributors are reluctant to confirm forward orders owing to fears of a weak construction season. Traditionally, the country’s inhospitable winter season ends in mid-April. 

Indian stockists have been highly critical of the pricing strategies employed by their domestic suppliers. Mills are concentrating on winning compulsory local purchases from public sector undertakings. End-users plan to closely monitor the price premium charged by the local producers relative to imports, before deciding where to purchase. Project-completion is traditionally expedited before the end of the current financial year. Conditions in overseas markets are difficult.

In Ukraine, buying activity is restricted by seasonal factors and credit limitations. Service centres are reviewing their inventories and are extremely cautious about order placement. Traditionally, the construction season commences in mid-April. Overseas business is very competitive.

Price volatility is eroding market sentiment, in Turkey. Local traders have questioned the sustainability of the current transaction values – citing that price support is limited amid low enquiry rates. We note a reluctance on the part of end-users to commit to forward orders. Speculation is rife that local steelmakers will push for higher prices, in March. Exporters note that overseas buyers are reluctant to place orders.

Purchasing volumes in the United Arab Emirates are forecast to be stable, at best, in the next trading period. State-funded capital projects and infrastructure spending has been inhibited by the downturn in crude oil revenues. In March, many buyers at service centres plan to use Asian finished steel offers as a price barometer to push for lower quotations from their other foreign suppliers.

Business confidence is eroding in the South African steel market. Construction activity is flat, with minimal signs of growth. Distributors and traders are sceptical regarding whether buying activity will pick up, in March. Several of these firms are facing tight profit margins and working capital problems. Inventories are quite high for several product types.