Pricing remains resilient
April 2018
AME forecasts that steel prices will lose the upward momentum of 2017 and will rationalise lower over the course of 2018 as raw material prices begin to decline and the Chinese supply and demand dynamic normalises.

AME forecast that both HRC and rebar prices will slowly decrease over the June Quarter 2018, driven by building inventory levels and restricted Chinese production ramping up exiting winter restrictions. New restrictions in Tangshan and Handan will have little effect on 2018 production. Demand growth in China is expected to continue, albeit at a slower pace due to a push for financial consolidation and tighter regulation in the real estate sector.

In March, AME estimated steel prices, on average, increased 4.4% month on month, and 23% year on year. The Asian rebar price averaged US$563/t for the month, up 3.0% from February and up 28% year on year. Asian HRC decreased 1.6% month on month in March, to US$618/t on building inventory start and sluggish demand. Slab prices continued to see significant gains in March, up 8.7% month on month, driven by limited allocations and strong prices for flat products. AME expects that slab prices have reached their peak and will fall in coming months.

Apparent finished steel demand in China decreased 3.1% in February to 64.9Mt, impacted by a shorter month and the Lunar New Year break. Steel product imports increased 13% while China exported 4.9Mt of steel products in February, a 4.3% increase month on month. Domestic steel inventory continued to build from the high base levels in February resulting from the Lunar New Year break. Rebar and HRC stocks peaked in mid-March at 9.8Mt and 3.1Mt respectively, the highest levels in more than two years. Inventory of both products finished the month down slightly but higher than February levels. Inventory levels are expected to remain elevated as Chinese supply returns from winter restrictions and awaits increased construction activity to draw down stock.

The iron ore price decreased in March due to building stockpiles, averaging US$70/t for the month. The price spread between 62% Fe and 58% Fe ore remained flat month on month but is expected to narrow as Chinese steelmakers prepare to blend in lower grade material after winter. The spot premium hard coking coal price fell in March, averaging US$217/t for the month due to a reduced Chinese appetite for imports. AME forecast prices will remain supported by Chinese steelmakers ramping up.