Notes from a Steel Buyer in Asia
SMU happens to have contact with a U.S. based steel buyer traveling in Asia looking for steel export opportunities and getting a feel for the landscape and mood in Asia. Here is a portion of what they had to say late last week:
“Construction appears to be booming around Shanghai. A world expo will be held here in May 2010 and there is much construction ahead of the Expo. Funny thing is you see tons of cranes but very little actual work except on the government projects. A high speed train is being built between Shanghai and Beijing. Everything appears very prosperous and the traffic is almost as bad as India. I heard the China Steel numbers you reported but have been told the larger Chinese mills are more like 520 [$ per metric ton] into Taiwan and that within China the number is more like 460. Mill yesterday said that pricing within China has bottomed and is beginning to rebound. Judging by Shanghai this is believable but I don't know how far this extends.
I have been told that times are really tough in Taiwan as China Steel is demanding prices that are making it hard for rerollers to compete. But still more capacity is coming online. Just at YP China and they have started up 3rd coating line. Seems as if there are a lot of trips planned to Europe over next few weeks as no one likes the $ but economy is worse there than US.
I have been to some rerollers and have not seen what I would consider excess inventory and the lines have been running. However, there seems to me that there is a similar feeling as the summer of 2008 - everyone feeling that the good times would last forever.
As usual the drivers are the best source of information. The average person in Shanghai area earns equivalent of $500 US per month. The average high rise apt (400 sq ft) is US $100K. So where does the average person live?
There has been a lot in local papers about the govt pulling back from stimulation because of concern about a too hot economy. I am told actual inflation is at 15%. The economy is not exporting.”
Clarification Provided by another Asian Source
One of our sources in Asia clarified a couple of the pricing points made by our buyer above. The $520 MT is for RRQ (re-rolling quality) HR. The range of $460-$470 MT domestic Chinese prices is for “simple SS400 (A36) quality”.
Our source provided the following over the weekend as well, “The statement China has bottomed out and starting to rebound. My suggestion, HOLD THAT THOUGHT...
You can see the comments of new capacity coming on line…This is not a good sign John and it will be my number which I advised to you [85 million metric tons of new or revamped steel capacity coming online in China by the end of 1Q 2010].”
We hope to have more information out of various locations in Asia over the next few days and it will be available in our normal newsletter publication. You can register for a free trial to our newsletter online at www.steelmarketupdate.com