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April 2016

Summary

Contact TSI:
Marina Maliushkina
Tel: +44 20 7176 7667
europe@thesteelindex.com

US HR coil price rises accelerated in April, TSIs daily US Midwest HR coil benchmark raced

past the US$500/short ton mark to finish the month at US$520/s. ton, a jump of US$76/s. ton
from the beginning of Q2.

Eric Zhu, Anh Nghiem


Tel: +65 6530 6596
asia@thesteelindex.com

European steel prices continued to rise in April, as buyers turned to domestic material in the

absence of competitive import offers. European producers were able to push through several
rounds of price hikes. Both TSIs North and South European HRC indices gained over 40/
tonne during the month.

Jasmine Kurjakovic
Tel: +1 412 431 0584
america@thesteelindex.com

TSIs ASEAN HRC index surged during the first three weeks of April, when it reached US$479/tonne
CFR ASEAN port, its highest level since December 2014. But as the Chinese domestic market started
to weaken, export prices made a U-turn, and the index ended the month at US$465/t.
TSI Weekly Steel Hot Rolled Coil Reference Prices (change week-on-week)
Benchmark Indices

April 4-10

April 11-17

April 18-24

Apr 25-May 1

Northern Europe, Ex-Works (/tonne)*

359

+4.7%

364

+1.4%

367

+0.8%

381

+3.8%

Southern Europe, Ex-Works (/tonne)*

350

+4.5%

353

+0.9%

361

+2.3%

375

+3.9%

ASEAN Imports, CFR ASEAN Port (US$/tonne)*

393

+1.6%

431

+9.7%

467

+8.4%

468

+0.2%

USA, FOB Midwest Mill (US$/short ton)*

449

+1.4%

476

+6.0%

493

+3.6%

520

+5.5%

Turkey , Ex-Works (US$/tonne)

457

+3.9%

480

+5.0%

488

+1.7%

514

+5.3%

Chinese Exports, FOB China Port (US$/tonne)

373

+0.5%

421

+12.9%

440

+4.5%

453

+3.0%

35,850

+1.6%

36,137

+0.8%

36,273

+0.4%

36,323

+0.1%

India, Deliv ered, Duty Paid, Mumbai (Rs/tonne)

TSI Hot Rolled Coil Monthly Average Prices (change month-on-month)


Benchmark Indices

January

February

March

April

Northern Europe, Ex-Works (/tonne)

319.35

+0.8%

322.67

+1.0%

334.67

+3.7%

366.86

+9.6%

Southern Europe, Ex-Works (/tonne)

286.40

+2.0%

288.05

+0.6%

310.14

+7.7%

359.05

+15.8%

ASEAN Imports, CFR ASEAN Port (US$/tonne)* *

290.90

+6.0%

296.95

+2.1%

362.45

+22.1%

437.33

+20.7%

USA, FOB Midwest Mill (US$/short ton)

391.00

+5.7%

400.10

+2.3%

413.71

+3.4%

482.57

+16.6%

Turkey , Ex-Works (US$/tonne)

313.00

-1.6%

325.40

+4.0%

420.50

+29.2%

484.75

+15.3%

Chinese Exports, FOB China Port (US$/tonne)

274.25

+4.6%

285.40

+4.1%

345.50

+21.1%

421.75

+22.1%

29,459.75

-2.6%

29,170.00

-1.0%

33,858.25

+16.1%

36,145.75

+6.8%

*Average of TSI's daily prices rounded to nearest whole number, **SAE grade

United States

US Steel Mill Capacity Utilisation (%)

70
65
60

US crude steel capacity utilisation and output were both flat month-onmonth in April, averaging 72% and 1.523 million metric tonnes respectively, over the five-week month, based on weekly estimates from the
American Iron & Steel Institute (AISI).
Continued on next page

The Steel Index 2016 page 1

Apr 09, 2016

Mar 12, 2016

Jan 16, 2016

Feb 13, 2016

Nov 21, 2015

Dec 19, 2015

Sep 19, 2015

Oct 24, 2015

Jul 25, 2015

Aug 22, 2015

Jun 27, 2015

May 30, 2015

Apr 04, 2015

May 02, 2015

Mar 07, 2015

Jan 10, 2015

Feb 07, 2015

Nov 15, 2014

Dec 13, 2014

Sep 20, 2014

Jul 26, 2014

55

Oct 18, 2014

According to the Metals Service Center Institute (MSCI), service center


steel inventories slipped 19.6% year-on-year in March to 7.685 million
short tons. This represented 2.3 month of supply as per Marchs shipment times. Monthly shipments in March rose to a five-months high of
3.333 million s. tons but remained 9.2% lower y-o-y.

75

Aug 23, 2014

Perhaps most tellingly, Asian steel prices grew even more over the
same periodASEAN HRC imports leapt 46% between March-April
(see page 3). The general increase in global flat steel prices will have
supported rises in the US Midwest.

80

Jun 28, 2014

Successive list price hikes by steelmakers, a US$50/long ton surge in


domestic shredded scrap prices during April buy-week and low steel
inventories at service centers were all factors contributing to the rise in
flat steel prices.

85

May 31, 2014

With the onset of Spring and a warmer climate beckoning for the US
Midwest, steel markets in the region also showed signs of heating up
as HR coil prices surged US$76/short ton FOB Mill across April to
close at US$520/s. ton. Last months rise followed on from a US$44/s.
ton increase over March, leading to a 30% jump in spot prices in just
over two months.

May 03, 2014

India, Deliv ered, Duty Paid, Mumbai (Rs/tonne)

Source: AISI

April 2016

USA continued...

0.6
0.4
0.2

Apr-16

Mar-16

Feb-16

Jan-16

Dec-15

Nov-15

Oct-15

Sep-15

0.0

Aug-15

ISM noted that whilst new orders and production grew at a slower pace,
employment improved, though it remains in contraction.

0.8

Jul-15

The Institute for Supply Management (ISM) published its April PMI for
manufacturing activity, showing a one percent slowdown in the rate of
growth to 50.8.

1.0

Jun-15

2016 year-to-date import volumes (including Aprils preliminary data)


totalled 3.85 million metric tonnes, -31% compared with the same period
last year.

1.2

May-15

Preliminary Steel Import Monitor & Analysis (SIMA) data released by the
US Department of Commerce showed flat steel imports were largely
unchanged month-on-month in April, at just over 900kt.

Millions

US Flat Steel Imports (million tonnes)


1.4

Source: AISI, US Dept of Commerce. Apr-16 values preliminary

Northern & Southern Europe

Having reached selling prices of 360/tonne for HRC at the beginning of


the month, North European producers started to lift their offers to between 380-390/t. It took time for this prices to trickle down into the spot
market, as many buyers initially stepped back from the market before
committing to the new, higher price level. But as mills delivery leadtimes began to stretch into July on the back of limited availability, new
asking prices were accepted and TSIs North European HRC index
edged up on stronger transaction prices to finish at 388/t.
Towards the end of April, ArcelorMittal announced new list price increases, taking its HRC asking price to 420/t. Other mills followed its lead,
and HRC started to be offered in the North European market above the
400/t mark. This was soon reflected in spot prices in the first few days
of May, when TSIs index jumped to 402/t.
During the first half of the month, HRC prices in Southern Europe shadowed the price level in Northern Europe, rising to 360/t and close to
380/t towards the end of April. Overall, market activity was slow during
the month, as buyers took time in accepting each new price hike.
A number of Italian producers were heard to withdraw their offers in the
final days of April only to come back with asking prices as high as 420/
t. Although some buyers were commenting that they viewed the jump in
prices too steep, some deals did indeed conclude at this level.
According to the European Steel Association (Eurofer), finished steel
imports increased by 23% year-on-year in Q1 2016. China, the largest
exporter, together with Russia, Ukraine, South Korea and Turkey accounted for 65% of imports over this period. Imports from Turkey registered a significant increase compared to 2015, as flat product imports
rose by 257% in Q1 this year.
Data from the German Association of Steel Distribution (BDS) showed
that flat steel inventories in the country ticked up to 1.37 million tonnes
in March, although this was still 6% down y-o-y. Flat product sales by
steel distributors remained practically flat m-o-m at 562kt (-3% y-o-y).
The Eurozone Manufacturing PMI showed a slight increase to 51.7, with
mixed regional performances. Whilst the manufacturing sector in Germany, Spain and Italy continued to expand, Frances PMI slipped to a
12-month low of 48.0.

India

HRC Spreads - Chinese Exports (FOB Port) vs EU domestic (US$/tonne)


90

N. Europe

S. Europe

70
50
30

10
-10
-30

Source: TSI

EU Flat Steel Imports vs. Exports (million tonnes)


2.0

1.8
1.6
1.4
1.2
1.0

0.8
0.6
0.4

Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep -15
Nov -15
Jan -16

In the absence of competitive imports, European steel producers were


able to push through several rounds of price hikes, and spot prices in
the region continued their steady ascent.

Imports

Exports

Source: Eurofer

German Distributors' Flat Steel Inventories (million tonnes)


1.7
1.6
1.5
1.4
1.3
1.2

The Steel Index 2016 page 2

Mar-16

Jan-16

Nov-15

Jul-15

Sep-15

May-15

Jan-15

Mar-15

Sep-14

Nov-14

Jul-14

Mar-14

May-14

Jan-14

Nov-13

Jul-13

Sep-13

May-13

Jan-13

TSIs weekly HR coil index edged upwards to Rs36,474/tonne, delivered, duty paid, Mumbai (+1.7%, 4-week change).

1.1

Mar-13

After the surge in domestic HR coil prices in March, April activity was a
little more subdued, with spot prices in the domestic Mumbai market
marginally higher month-on-month.

Source: BDS

April 2016

Asia

400

40.0

300

Apr-16

Mar-16

Jan-16

Feb-16

Nov-15

TSI HRC ASEAN Imports, Monthly Average (US$/t, CFR) LHS

Dec-15

Sep-15

Oct-15

Jul-15

Aug-15

Jun-15

Apr-15

May-15

Mar-15

Jan-15

Feb-15

Nov-14

Dec-14

Sep-14

Oct-14

Jul-14

Aug-14

35.0

Jun-14

250

China Steel PMI


Sources: TSI, CSLPC

Chinese Finished Steel Exports (million tonnes)


12
11
10

9
8
7
6

Chinese news agency Xinhua reported that Hebei, the steelmaking


heartland in northern China, would ban reopening of steel mills that
were previously ordered to shut down and step up its monitoring of the
steel capacity coming on stream.

Despite these measures, monthly Chinese crude steel production hit


70.65 million tonnes in March, up 3% year-on-year, data from the World
Steel Association showed.

3
2

Mar-16

Feb-16

Jan-16

Dec-15

Nov-15

Oct-15

Sep-15

Aug-15

Jul-15

Mar-15

45.0

350

Jun-15

Chinas steelmaking capital, Tangshan, commenced its emission cuts


ahead of the Horticulture Expo this month, ordering output reductions of
up to 50%. However, the recent price spike also motivated some of the
recently loss-making mills to reopen. Haixin Iron and Steel Group, producing around 5 million tonnes of steel in its heyday, was taken over by
another private company Jianlong Group. Local media reported that the
plant was to be reopened on April 30.

50.0

450

May-15

With the short-term availability of Chinese-origin HRC limited, TSIs


ASEAN imports index reached US$479/t by mid-month, US$92/t above
of where it started April. It reversed its course thereafter, as traders,
spooked by weakening spot and futures markets in China quickly cut
offer levels. The index finished April at US$465/t, a staggering 70%
increase over its 2015 low, recorded towards the end of last year.

55.0

500

Apr-15

ASEAN buyers were initially reluctant to accept price hikes from Chinese exporters to above US$400/tonne CFR ASEAN Port, starting off
April in a wait-and-see mode. But by the second week of April, seeing
continuous increases in Chinese prices, trading activity picked up and
both re-rollers and traders began placing orders.

60.0

550

Apr-14

The combination of a pick up in infrastructure projects and real estate


investment in China, together with a number of mill shutdowns, continued to support bullish sentiment in the Chinese steel market, fuelling a
rally in domestic and export prices.

May-14

ASEAN HRC Imports Prices vs China's Steel PMI


600

Source: China Customs

440
430
420
31-Mar-16

410

06-Apr-16

400

TSIs domestic HRC index finished April at US$514/t, up US$74/t in a


month, having gained over US$200/t from the start of the year.

390

According to news reports, Turkish producers Erdemir, Toscelik and


Colakoglu withdrew their request for an investigation of HRC imports
and the Turkish ministry of economy cancelled already introduced transitionary measures. The investigation into HRC imports from China,
Russia, Ukraine, France, Romania and Slovakia started in January
2015 and provisional antidumping duties were imposed in August 2015.

370

10-May-16

380

360

The Steel Index 2016 page 3

Mar-18

Jan-18

Feb-18

Nov-17

Dec-17

Sep-17

Oct-17

Aug-17

Jul-17

Jun-17

May-17

Apr-17

Feb-17

Mar-17

350

Jan-17

Each round of price increase was swiftly accepted by the spot market,
as buyers expected the price rally to continue. However, with falls in
Chinese domestic prices at the end of April, market participants started
to express their doubts about the longevity of the domestic price uptrend and withdrew from the market.

ASEAN HR Coil Imports Forward Prices (CFR ASEAN Port, US$/tonne)


450

Dec-16

With global steel prices continuing to strengthen and a lack of competitive imports, Turkish steel producers repeatedly hiked their offers with
asking prices moving firmly above the US$500/tonne mark by the end of
April, and some mills were quoting as high as US$550/t.

Oct-16

Nov-16

Turkey

The North European HR coil swap (basis TSI) curve was in backwardation on May 10, 2016 (see page 4). Swaps throughout the
2016 period were marked at 400/tonne and then dropping to
390/t over the 2017 contract months.

Sep-16

Trade data from the Official Statistics of Japan indicated that exports of
Japanese HRC into the ASEAN region increased by 10% month-onmonth, reaching 430kt in March.

Aug-16

With steel prices surging and then experiencing a correction at


the end of the month, the forward curve saw similar rises and
falls. A Q2 2016 swap traded on April 28 at US$445/tonne for 3kt,
around US$20/t higher than the current curves valuation (May
10).

Jul-16

Chinese steel exports totalled 9.98 million tonnes in March, up by 30%


year-on-year and 1.87 million tonnes above the level recorded in February, China Customs data showed. The country has exported 27.83 million tonnes in the first quarter of 2016, up 7.9% y-o-y.

Jun-16

The front-month swap for SGXs cash-settled ASEAN HR coil


contract (basis TSI) was at a US$12/tonne premium to spot prices, as of May 10. 2016. The contango (chart below) is relatively
flat for the remainder of the year and into 2017.

Apr-16

Trade Data

Derivatives & Futures

May-16

Chinas steel purchasing managers index (PMI) moved above the 50points threshold for the first time in two years, as the index jumped to
57.3 in April, up 7.6 points in a month. Sub-indices including production,
new orders and new export orders all posted large increases, while
finished product inventory continued to shrink, implying that the market
was improving in what has traditionally been the busiest season.

Mar-16

Source: SGX

April 2016

TSI on the marketMay

European HR Coil Steel Prices (/tonne)

European steelmakers seem to be confident that the price rally in the


region is set to continue. Buyers, who were previously relying on imports, are now forced to switch to domestic material and some have
trouble securing necessary volumes, with the situation reportedly the
most difficult in the HDG coil market. With mills delivery lead-times
stretching into the middle of the summer, steelmakers appear to have
an upper hand in negotiations at the moment, and their new target for
HRC prices across the continent seems to be 450/tonne.

515

Publishing its latest Short Range Outlook, the World Steel Association
(WSA) remained pessimistic about the near-term future of the industry.
WSA cut its previous global steel demand forecast for 2016 from 1.5
billion tonnes to 1.48 billion tonnes (-0.8% year-on-year) after noting a
contraction of 3% y-o-y in 2015. A slowdown in China is expected to
continue, but steady growth is predicted in the NAFTA region and the
EU. For 2017, the Association forecasts an improvement in steel demand in all markets except China.

355

Historical

475

Forward

435
395

Northern Europe

315

Southern Europe

275

Sources: TSI, LCH.Clearnet (forward)

In its latest market report, the European Steel Association (Eurofer)


noted that prospects for 2016 in Europe are relatively positive, with
overall growth in steel using sectors expected to be 1.9% y-o-y. The automotive sector is
forecast to remain the top performer, although the pace of growth is predicted to slow to 3%
y-o-y (from an 8% rise in 2015). Apparent steel demand, however, is expected to remain
unchanged from last years 152 million tonnes, partly attributed to stock overhang at the
start of the year.
Market participants in Asia expressed their concerns about the future performance of Chinese steel markets with the rainy season approachinga period traditionally associated with
low steel demand. With recent increases in steel output, the potential for a supply/demand
imbalance leading to a price fall is fostering an increasingly bearish outlook among some
market participants.
Despite recent reports of an environmental incident, allegedly linked to Formosas steel mill
in Vietnam, factorys operations remained unaffected. Currently re-rolling slabs, the mill is
expected to start its first blast furnace in June.

Contact The Steel Index (TSI)


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CHINA

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Tel: +44 20 7176 7667

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Marina Maliushkina
europe@thesteelindex.com

Kurt Fowler
america@thesteelindex.com

Tim Hard
asia@thesteelindex.com

Julie Jiang
china@thesteelindex.com

About The Steel Index (TSI)


The Steel Index (TSI) is a leading specialist source of independent steel, iron ore, scrap and coking coal price information based on spot market
transactions worldwide.
Transaction price data is submitted confidentially to TSI online by companies buying and selling a range of relevant steel, iron ore, scrap and coking
coal products. TSIs index reference prices are then calculated using transparent and verifiable procedures.
TSI steel prices are used for the settlement of European hot rolled coil (HRC) steel swap contracts cleared on LCH.Clearnet and CME Clearing Europe and Asian HRC steel futures and swap contracts cleared on the Singapore Exchange (SGX). Contracts settle against the monthly average of
TSI's daily indices for North European HRC, South European HRC and ASEAN HRC imports respectively.
TSI is owned by Platts, part of S&P Global. Further information on TSI, including details of product specifications and procedures, and a free trial of
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The Steel Index 2016 page 4