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A Steel Glut Imminent?
Turning back to fundamentals, we note an interesting piece on the prospects before the steel and copper industry. It appears that the record restocking has finally started to take a toll on the supply/demand intersection. As a sellsider puts it, there is a lot of pain to come for the steel industry, to wit: "1. Weak demand - particularly auto and appliance (flat rolled) 2. Production cuts coming 3. Iron or benchmark prices to peak in Q3 (CLF is largest US name) 4. Challenging 2H for steelmakers." Chinese overstocking on copper is also not going to help the bulls.
Steels and base metals underperformed yesterday amidst more cautious news that Severstal has closed their Sparrows Point mill (~5M tons of sheet) due to weak demand. Recall last week MT was idling production early in Europe and Baosteel announced price cuts for July prior to next quarters iron ore pricing.
Today in Shanghai Baosteel Chairman made further cautious comments:
1. Weak demand - particularly auto and appliance (flat rolled) 2. Production cuts coming 3. Iron or benchmark prices to peak in Q3 (CLF is largest US name) 4. Challenging 2H for steelmakers
Although I had hoped for a bounce from these oversold levels it seems that market sentiment now is similar to 2008 whereby macro policy and liquidity risks will be main overhang on stocks. Turning quickly to copper (FCX down 7% yesterday) story there is Chinese had bought a lot of copper on fixed volume contracts in Q4 and are now trying to push back on miners saying they have too much copper. Imports for China are likely to drop in July as we see more supply ex-China. The flow has been muddy with vanillas adding small and hf's playing ranges.
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OT: The Swiss to temporarily halt disclosure of US Tax dodgers.
http://www.cnbc.com/id/37571506
Economy is slowing down.
u mean it was going fast?
It was, but in reverse.
Moin from Germany,
one of the biggest steelproducers in Germany Salzgitter AG has also anounced that it´s unlikely that they will made a profit in 2010....
They also lost money 6 quarters in a row......
Even their usually strong pipe business isn´t performing.....
Thanks to this kind of "strong performance" they got kicked out of the DAX this week....
An EVERYTHING glut (excepting gold and solvent counter-parties) is imminent.
More funemployment for the Steel Workers. Good thing for them that they can draw it forever.
Anyone interested in more on steel/copper pricing and inventories - ISRI (recycling association) provides a Monday and Friday report, which can be found here:
http://images.magnetmail.net/images/clients/ISRIID/attach/June8a.pdf
This is just what I needed to read "the dude." The sky might not be falling after all.
Silver is often a byproduct of copper mining.
More copper supply is coming online as well. Mexican federal police 'convinced' striking union workers to remove themselves from the Cananea mine:
http://merrillovermatter.blogspot.com/2010/06/mexican-police-crack-union-skulls-at.html
Disagree with the broad term "steel glut". Maybe steel pipe as noted above, via the China connection. Garbage steel I'm sure is plentiful.
I've been trying to source EuroNorm (EN) spec material in the eurozone for the last year with little luck and large lead times.
The mills have slowed to a crawl in anticipation of low demand, with few exceptions, they have been right.
As with many industries, too many suppliers and too few customers. The cycle of boom bust seems to be contracting. Makes it difficult to have a realistic business plan and pay off your financing. Seems to me the elite are itching to start another war to burn up the excesses....
According to the International Copper Study Group;
"In 2009, China's apparent consumption increased by 38%, significantly exceeding the estimated growth in China's semi-manufacture production. It is believed that substitution of refined copper for direct melt scrap and the accumulation of unreported refined copper inventories accounted for the difference...."
This is another way of stating that roughly two million tonnes of copper were accumulated but not consumed. Stories of pig farmers storing their wealth in copper cathode (ie. $US) behind the barn abound. Not a very healthy situation particulary if the currency does revalue.