Spot steel prices across the world remained under pressure falling on Friday 1 July to under US$1000/t in the USA, under US$900/t in Europe, and approached US$650/t out of China where steel mills have seen their minimal profits fall over 60% so far this year; contrasting with raw material suppliers.
However, sentiment appears to be improving as China’s Manufacturing Purchasing Managers Index rose in June for the first time in four months, indicating that manufacturing activity is finally back on the rise after an unusually prolonged period of decline. The last time the index was reported to have risen, Chinese spot prices rose approximately US$165/t m/m and in line with the index, prices have been falling ever since.
To the benefit of steel consumption, and flat-rolled steel consumption in particular, it was manufacturing output that rose most emphatically in the detailed results of the PMI to a score of 52.8, compared to just 50.2 for the index overall. Not surprisingly a key sub-index, the purchase quantity index, which refers to manufacturers most imported raw materials such as steel, also rose for the first time since February and at the fastest rate since June 2021.
Unfortunately for long products suppliers in China, the business activity index for real estate and residential services, an important subset of the booming construction index, remained in negative territory last month. Real estate starts in June are typically among the highest in the calendar but this seasonally-weighted indicator suggests that they won’t have been quite so strong as usual, compounding the gloom. So far this year, new real estate starts are 30.6% below year-ago levels dragged down by the residential sector. It is because of the erosion in steel construction that Chinese demand for steel overall is in decline, unusually, and for a second consecutive year, which is even more unusual. It happened previously in 2014 and 2015, before the recent 5-year boom that ended in 2020.
API plate
API plate prices in Europe have been corrected to an extent following a drop in commodity plate pricing over recent weeks. Currently, prices of commodity plate in Europe are fluctuating at the level of €1200-1300/t ex-works. Availability of API plates in Europe, in particular for sour grades, remains very tough, and delivery lead times for non-sour plates are not less than 5 months and 6-7 months for sour grades. Rystad expects API plate pricing will remain at these high levels for the remainder of the year and will not follow the price reduction of commodity steel due to the overall reduction in allocations of API plate. Therefore, the premium for API plate over commodity grades, especially sour service, will remain high. Moreover, commodity plate prices may start to increase again on expected demand recovery due to a combination of restocking and restart of some projects, pushing up API plate prices in turn. Additionally, rising energy costs in Europe and strong demand for heavy plates from other industries will also lend further support to API plate pricing in the region.
Export prices for API plate from China have been slightly declining as part of a general downward price trend in the Chinese steel market. The price decline is also being pushed by a large decline in coking coal price as the government in China calls for a reasonable trading price range executed in long-term coking coal contracts. Despite some downbeat sentiments in the Chinese steel market, the API plate sector will unlikely be impacted significantly as project demand is good and API plate plants are in good booking. It is expected the buying interest for Asian API plates to increase even more due to tight supply availability from European mills. Additionally, Rystad Energy hears from market participants that new export policy measures may come in place in order to support prices.
