Monday,April 4
Spot prices in Asia, after weakening a bit, have started to recover in the past week or two..* Steel traders report that much of it is due to the fact that some precautionary buying is happening due to (1) potential supply disruptions from Japan, and (2) anticipated price hikes in 2Q as higher material costs set it.
Furthermore, spot iron ore prices have started to recover again, as some Chinese mills return to buying. They have been running down inventories on the hope that iron ore prices would soften when it came time to buy again, and now that these inventories are low, they need to replenish them.
While some Chinese mills had announced price hikes for April, many of them – such as Shagang – have begun to roll them back. However,there is expectation that some prices will recover again in May/June as material costs are going to be much higher. Mills are telling buyers/traders that they simply cannot afford to cut prices further, given some are already at cash cost.
Sentiment among traders remains somewhat weak, with little conviction that a rebound in steel prices is sustainable.
Source: Goldman Sachs
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