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BizVerify |
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| Shanghai Donghuang Forging Co., Ltd. |
| Verified By : Huaxia D&B |
| Verified Date : 2011-11-22 |
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| US steel maker price hike move hits road block |
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Reuters reported that tepid demand for steel and drastic price cuts by Chinese producers appears to have thwarted price increases announced by US steel producers for the fourth quarter.
As per repot, some US steel producers said they never actually received USD 600 a short tonne for hot rolled coil, a benchmark for steel sheet prices. Others would not specify the prices they have received, but demand has ebbed since the increases were announced in August and Chinese prices have fallen sharply.
Mr Charles Bradford metals analyst at Affiliated Research Group LLC said that "I am sensing that the USD 600 didn't fly that US Steel announced for November and December. The fact that they announced it for two months started a lot of the weakness. People said things can't be that good if they're willing to give a fixed price for a couple of months."
During the first 7 months of 2009, US steelmakers were operating below a 50% capacity rate and found it tough to push higher prices through to customers. But by late summer, the success of the US government's cash for clunkers program and depleted inventories spurred some producers to restart capacity and announce price increases.
But according to some analysts, they think some mills tried to push prices too far, too fast.
Mr Brian Yu metals and mining analyst at Citigroup said that he viewed the ISM reading as positive, showing manufacturing sector expansion in September for the second consecutive month. He added that "Overall, the report is supportive of our favorable steel outlook, as the trajectory of apparent demand remains positive. The new orders index declined, but still pointed toward substantial growth, and destocking came to an abrupt halt."
A producer like US Steel needs higher volume output to break even. Without it, the company may not be able to keep a blast furnace going even with higher steel prices. On the other hand, electric arc furnace producers, like Nucor Corporation, are agile enough to be profitable at USD 600 a tonne.
Last week, steel processor, Reliance Steel & Aluminum Co said that it has seen no meaningful pick up in demand, though average daily shipping volumes have improved slightly.
Mr Bradford said that Chinese flat rolled steel export prices are now about USD 450 a short tonne. Applebaum said this is near production costs for Chinese steelmakers and therefore close to a bottom.
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