Hot-rolled band export price RISING. However, a price setback may occur this summer due to increased supply.

The Tier I mills’ hot-rolled band export price in the past month has moved up by about $25 per tonne to the $400 per tonne level, FOB the port of export.  At the same time, WSD’s contacts indicate that the steel slab export price has risen by about $30 per tonne to approximately $330 per tonne, FOB the port of export.

A further $10-50 per tonne price spurt for hot-rolled band seems a 65:35 possibility in the next month.  Our contacts indicate that the mills in a number of countries are pushing for higher prices, while other mills are withdrawing from the market in order to jump start higher prices.  The weakening U.S. dollar is a factor pushing up the export price because many mills’ costs – in dollar terms – are up.  (Note:  In fact, there’s a fairly good historic inverse correlation between the value of the dollar and the price of hot-rolled band on the world export market.)  Apparent steel demand, except for North America, seems to be rising as buyers are slowing, or ending, their inventory liquidations.  With steel mill production still restrained in most countries, the market psychology from the steel mills’ perspective is clearly less negative than previously.  (Note:  In its two prior Early Warning System reports, WSD discussed the rising likelihood of a hot-rolled band price rally on the world export market and that, if the rally occurred, it would probably not be sustained.)

Granted that the HRB export price rises to $410-450 per tonne, FOB the port of export, WSD places the odds at 60:40 that the higher price may not be sustained.  Even granted that global apparent steel demand will rise higher in the months ahead versus the level a few months ago, the HRB export price may be driven down by:  a) increased offerings by steel mills in a number of countries, including perhaps ones in the USA and China, because the price is attractive and they need more volume; b) falling HRB production costs globally, perhaps to an average of $400 per tonne, reflecting reduced iron ore and coking coal prices; c) a decline in steel scrap prices after their recent fairly sharp rally (in fact, scrap prices turned down in the past few days); d) seasonal factors, including lower demand due to the monsoon season in India that runs from June through August, holidays in Europe in August and the Ramadan holiday in the Middle East in September; and e) steel buyer price resistance.  Steel buyers in many cases are not confident about the steel demand outlook.  The steel industry and its customers remain in a “cash is king” mode because banks are still far more restrictive in their lending standards than in the first half of 2008.

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