Market News: February 2017

 

Münster's review

As in every year, the price of raw material P250GH / C22.8 has risen after the Chinese New Year festival. Prices fluctuated throughout complete February. At the end of the month, the increase was about 10% compared to the pre-festival value.

In January there were also price increases for the raw material in the stainless steel sector. However, these remained one-digit.

General price development for flanges and raw materials

Directly after the Chinese New Year festival, prices for P250GH rose by 5%. In mid-February the value then rose almost every hour, reaching a peak with increases of about 25%. At the end of the month the market calmed down somewhat and the increase was about 20%.

The raw material for stainless steel continued to rise. But only in the moderate single-digit percentage range.

The downtrend of prices for coking coal FOB Australia, which started in December, continued in February. The price was at the end of the month at the level of 2012. The only reason for the price decline is the unnatural rapid rise in prices in 2016. The price decline is, so to speak, a kind of health cure.

Situation in China

After the New Year's festival, the Chinese were slowly entering the business again. As usual, however, with a reduced crew. Also this year, many workers have come late or not at all  back from their holidays.

We were informed by our stainless steel suppliers that strong price increases are expected for the coming month. Really, this announcement is not sure yet, but there are signs that justify this suspicion. Thus, e.g. numerous stainless steel producers did not make any offers in mid-February for a week as they expected price increases and wanted to benefit from this. The expected increases have also occurred in the same way.

This will make the situation even more difficult for our Chinese partners. Currently manufacturers are already suffering from the extremely low prices that come from India. At the Indian price level, nothing has changed even after the introduction of the 3.7% EU import tax.

The development of recent years has led to a delicate selection in the region where manufacturers are located for flanges of stainless steel. Starting with about 100 manufacturers about five years ago, now only 20 to 30 factories have survived.

In the area of ​​carbon steel flanges, the upward trend in the pre-material prices for P250GH is continuing - with strong fluctuations. In the middle of the month, the previous high was reached, then slightly weakened towards the end of the month. Nonetheless, the price increases in the high double-digit range.

Our partners expect prices to continue to rise.

The reasons for the price increase are ultimately global. In order to meet the requirements of the western world with regard to anti-dumping prices, China has to reduce its steel overproduction. One of the measures of the Chinese government is the closure of steel mills.

The EU is accused of the fact that these measures are far too half-implemented and the production of steel in 2016 has not been satisfactorily reduced. Further punitive duties are the consequence and a deliberately disturbed imbalance in the steel sector.

The closure of the steel mills, however, has led to a shortage for the material P250GH. This shortage makes the prices exploding. It is again about pure procurement as well as simple market laws. However, only on the part of Chinese buyers. Here in Europe the ever-increasing prices are causing headaches for traders.

Domestic markets

According to the Ifo Institute for Economic Research, the business climate index in the steel sector rose slightly in February 2017.

We at the LPC observe a sharp increase in potential project business. This is not only seasonal, but in direct comparison with the value of the previous month. However, a real and perceptible economic improvement is not to be expected at the moment. However, clear positive impulses are observed.

Throughout the steel sector, the domestic market has been hit by dumping prices from China and the number of anti-dumping measures is increasing.

Except for the area of ​​the flanges. Here the development in the last months is completely opposite. In fact, in the last few weeks, flanges of certain dimensions can be bought more cheaply in production in Europe than in China.

Münster's forecast or my view into the crystal ball

This time, my outlook is more kind of an analysis than a glimpse into the glass ball.

The fact is that the cheap prices, which have established themselves in the market in recent years, are unhealthy. Dumping prices are never healthy and never successful on long run. In our industry, the margins have shrunk further and for the equivalent of a flange DN 100 PN 16, it was not even possible to buy lunch a few weeks ago. For a product that has undergone a variety of production steps and has been transported through half the world.

In recent months, customers, suppliers and other partners have agreed in countless conversations that a price increase would be healthy for all.

As far as the theory. But now we are at a crossroads. We do not know how prices will develop in China. Before any inventory purchases, our customers are very concerned about whether they buy at the right time. The fear of buying at a peak time and then getting caught by falling prices  is great and present.

Every company is handling this situation differently. Some of them postpone their stock purchases and cover their intermediate need at stockholders. Other wholesalers, on the other hand, buy in European countries. And again, others continue to buy on a Chinese basis and keep their stocks filled and fine.

Ultimately, we all decide how the market will evolve. Sooner or later the last warehouse will be empty, the rarely European manufacturers will be fully booked, which will result rising prices and even longer delivery times. Meanwhile, the Chinese producer market will be thinned. Whoever does not have any reserves will disappear from the market.

At the latest, the higher prices will also be carried through by your end customers.

Of course, everything can also develop differently.

But I would like to wish you and us that healthy prices  in the market.

And I wish you a happy hand while buying at the right time and in the right place. If you need our support, we will assist you with pleasure.

Dynamic greetings from Bremen - let it go well!


Claudia Münster