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Johannesburg - The South African steel industry is still troubled by weak economic fundamentals, steel analysts MEPS reported on Monday.
Releasing a report on how steel prices in developing markets continued to increase in September, MEPS said underlying demand in South Africa was still driven primarily by state-funded capital projects.
"Private buyers are still largely absent despite the government's stimulus measures," said MEPS, adding that in spite of global economic woes, nearly all distributors have raised their basis prices.
Further adjustments are expected next month with ArcelorMittal South Africa having announced its flat steel basis prices would rise by as much as 4% in October.
In contrast, long product basis values are unchanged.
Turning to other developing markets, MEPS said the UAE market was also relatively quiet with sentiment mixed among local steel merchants.
"The more positive are forecasting improved trading activity at the end of Ramadan," said the report.
The emergence of material from Mainland China has checked the spike in import values and local UAE rebar producers have raised their domestic offers in response to higher billet and scrap values.
But sentiment among Indian flat product steelmakers remains upbeat.
Domestic offers for flat rolled material have risen once more and further increases are likely to follow, as the country enters its pre- festive season.
Traditionally strong
"This is a period when demand for consumer durables is traditionally strong. There are also positive vibes being felt in the long products segment," said MEPS.
The effective prices of construction steel have stabilised after previously negotiated deals were on a downward trajectory.
Orders from the building sector are now expected to harden.
In Brazil the steel industry has continued to benefit from the government's stimulus strategy.
The measures have primarily focused on large-scale public infrastructure projects, reduced duty on new cars and a series of tax breaks.
Healthier economic fundamentals have made internal producers bullish.
This month, Usiminas, CSN and ArcelorMittal raised their domestic flat steel products prices by an average of 13% while long product values were stable.
In Russia steel plant utilisation rates are on average approaching 75% with most of the major mills persisting with their August activity levels this month.
Severstal has announced plans for a substantial increase in output, aiming to raise supply by 13% to 850 000 metric tonnes.
MEPS said the Ukrainian steel industry was also showing signs of recovery.
Finished production in August increased by 6.3% to 2 415 000 tonnes compared to July but shortages in the local market and low inventories were starting to propel domestic prices higher.
The report noted that the Mexican market was, however, exhibiting no positive signs of recovery.
"Sentiment is subdued among end-users and this is echoed in low sales volumes. Manufacturers are still waiting for US consumer spending to rebound. Local steel producers have left the majority of their basis prices unchanged," said the report.
- I-Net Bridge
