The MEPS world all products composite steel price increased in June by 0.6 percent – the sixth consecutive monthly rise. However, amid a modest global demand outlook, MEPS predicts that steel prices are now very close to their peak for the current cycle.

The North American average price advanced by 5.8 percent in June as trade petitions and supply shortages continued to put upward pressure on domestic selling figures. From MEPS research, this month, the consensus view from steel industry participants is that selling figures are likely to stabilise, at best, in the near term. Purchasing activity, in fact, is expected to soften in the second half of the year.

In June, both Asian and European selling values fell, when measured in US dollar values, by 3.4 percent and 2.3 percent, respectively, month-on-month.

In China, steel prices are likely to come under negative pressure in the second half of the year. The steel sector has been repeatedly urged to reduce excess manufacturing capacity. However, we detect little evidence to suggest that significant production cuts are being made.

In fact, in response to domestic price surges at the start of the year, local mills ramped up output by starting up idled facilities. This is borne out from information issued by the China Iron and Steel Association that domestic daily steel output in mid-May rose to its highest level since June 2015.

As a consequence, more steel will be made available for export. This is likely to put downward pressure on steel selling figures around the world as low-priced exports from China are likely to become available in global markets.

Southeast Asia remains one of the few regions of the world in which steel demand exceeds domestic supply. This makes this area a prime target for low-cost Chinese imports and the prospect of declining selling values.

With the likelihood of increased global supply of steel from the mills and expanding availability, a continuation of the steel price revival is limited.

Source: MEPS International Steel Review – June 2016 Issue

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