Wednesday, February 25, 2015

Global Steel Price Down 17% YoY, German Employment

Large volumes of imports, together with collapsing oil prices, have led to cuts in domestic steel production in the US. However, these have not been sufficient to stem the continual, month-on-month, decline in flat product transaction values. Buyers are reluctant to make large purchases as figures trend downwards. Moreover, the volumes of unsold foreign material at the docks are climbing. Some of this steel is now priced above current domestic levels as local steelmakers have responded to the import threat.

The exporters are going to have to lower the price in USD of this unsold inventory they have sitting in the U.S. if they want to sell it... continued USD bullish imo.

And it looks like China is ready to do some price cutting and usual product dumping on their exports also, as the global race to the bottom continues in earnest:

Overcapacity problems, dramatically declining iron ore prices and disappointing economic indicators have driven steel selling values to record lows in China. Negative sentiment is growing. Recently, the Central Bank cut the bank reserve ratio in an effort to shore up flagging economic growth. Market players are waiting to see the impact on the steel sector. The Lunar New Year Festival (February 19-24) was later than it has been in the last few years. This led to buyers postponing steel order placement for a longer pre-holiday period than usual. Dealers were under pressure to sell ahead of the vacation. In overseas markets, export volumes reached a new high in January.

Meanwhile, in the EZ fiscal austerity continues to undermine the German domestic economy:

So you have the export nations Germany/Japan vs. China in a competition to see how far each can lower their real terms of trade with the US; while the lackluster US fiscal backdrop is resulting in a tepid US demand environment for the export products in general.

Unless the current lackluster US fiscal policy changes significantly this FY, the current bearish ex/im and "strong USD" environment is going to continue as the foreign exporters cannot gain any pricing power in the US market under the current macro circumstances.

No comments: