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Steel trade’s new cry: wailt 'till 2014

Keywords: Tags  steel imports, steel exports, James K. Lyons, steel trader, Catherine Ngai

In the minds of many steel traders, 2014--and not 2013--is the new target for an expected turnaround in the market due to oversupply, uncertain pricing and lackluster demand.

Early last year, a number of market sources said 2013 looked like it would be a promising prospect for a full recovery. But while the first half of 2012 looked strong for many domestic steelmakers, things slowed considerably in the second half on falling demand and oversupply issues.

The trading community has echoed much of that sentiment. U.S. steel imports totaled some 2.9 million tonnes in AprilÑmost likely on orders placed in the fourth quarter of 2011 and the early weeks of 2012Ñbut have fallen steadily ever since, with October preliminary figures slipping to some 2.3 million tonnes, according to U.S. Census Bureau data.

“I’m hopeful and optimistic that things will pick up slightly in 2013, but we may not see a true pickup for some time,” one flat steel trader told AMM.

Still, 2012 was a stronger year than 2011. Steel imports totaled 23.3 million tonnes in the first nine months of the year, 16.8 percent higher than in the same period in 2011.

The slower-than-expected market has affected shipments via Mobile, Ala., which traditionally has been a major steel hub. “The steel market seems to have flattened with the selling prices going down,” Alabama State Port Authority chief executive officer James K. Lyons said. “We just don’t see heavy construction projects here, although automotive is good. There’s a lot of fear in the marketplace, which is causing people to postpone or forgo major capital projects, where a lot of steel goes.”

Much of what is imported depends on Capitol Hill. According to policy and counsel sources, trade actions were surprisingly slow in 2012 but some domestic interests said a number of trade suits are brewing, including potential complaints against wire rod, plate and oil country tubular goods, which could affect imports.

In addition, many of the changes following the 2012 elections are expected to spill into 2013 as political pressure increases to hold China accountable for alleged illegal trade practices. The domestic industry argues that unfairly traded imports have hurt U.S. jobs, caused production lines to move overseas and weakened the overall domestic economy.

On the flat-rolled side, in particular, traders have said that while foreign pricing has remained relatively steady, domestic prices have fluctuated, causing fleeting moments when foreign products look competitive and other moments when foreign products look overpriced.

“Import pricing has been sort of the same now for months. What’s changed is that the domestic mills have gone up and down some $100 (per ton), and you have wild gyrations overlaid by steady import pricing, so sometimes business is good and sometimes it’s bad,” a second trader told AMM.

In addition, flat-rolled traders complain that domestic mills aren’t disciplined enough to keep capacity down in order to maintain higher prices. With the lack of a steady spread between domestic and import prices, the import market remains sluggish as would-be buyers are afraid of taking the plunge on material with two- to three-month lead times.

But a lack of interest from foreign mills in shipping to the U.S. market could pose another problem. In late 2012, the hot-rolled steel suspension agreement between the United States and Russia was amended, pushing prices up some 47 percent, effectively taking Russian hot-rolled coil out of the U.S. market. With a host of other existing dumping duties on the product, there are few places left from which traders can import.

On the other hand, the long products sector--including wire rod and reinforcing bar--could be strong in the first half of 2013, traders said. Wire rod from China has been a major part of the U.S. market since April 2012 due to competitive pricing, and reinforcing bar from Turkey showed strength early in the year.

“Looking forward, we’ll probably see the same kinds of numbers (in 2013 that) we saw this past year in the first few months,” a long products trader said. “Traditionally, domestic prices go up in the first two quarters, so that’s when we make most of our deals.”

But overall, traders said that even with depressed markets, the United States will always see imported material, and 2013 will be no exception.

“The U.S. market is still the strongest market in the world. Look at China slowing, and look at Europe demand falling apart. The import market in 2013 will be better than this past year, but we may not get a real change in demand for a few years out,” another trader said.

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