Tsi Monthly Steel Review April 2016

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The Steel Index 2016page 1

Contact TSI:

Marina Maliushkina

Tel: +44 20 7176 7667

[email protected]

Eric Zhu, Anh Nghiem

Tel: +65 6530 6596

[email protected]

Jasmine Kurjakovic

Tel: +1 412 431 0584

[email protected]

April 2016

Summary

US HR coil price rises accelerated in April, TSIs daily US Midwest HR coil benchmark racedpast the US$500/short ton mark to finish the month at US$520/s. ton, a jump of US$76/s. tonfrom the beginning of Q2.

European steel prices continued to rise in April, as buyers turned to domestic material in theabsence of competitive import offers. European producers were able to push through severalrounds of price hikes. Both TSIs North and South European HRC indices gained over 40/tonne during the month.

TSIs ASEAN HRC index surged during the first three weeks of April, when it reached US$479/tonneCFR ASEAN port, its highest level since December 2014. But as the Chinese domestic market startedto weaken, export prices made a U-turn, and the index ended the month at US$465/t.

United StatesWith the onset of Spring and a warmer climate beckoning for the USMidwest, steel markets in the region also showed signs of heating upas HR coil prices surged US$76/short ton FOB Mill across April toclose 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 justover two months.

Successive list price hikes by steelmakers, a US$50/long ton surge indomestic shredded scrap prices during April buy -week and low steelinventories at service centers were all factors contributing to the rise inflat steel prices.

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

According to the Metals Service Center Institute (MSCI), service centersteel inventories slipped 19.6% year-on-year in March to 7.685 millionshort tons. This represented 2.3 month of supply as per Marchs ship-ment times. Monthly shipments in March rose to a five -months high of3.333 million s. tons but remained 9.2% lower y-o-y.

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

Continued on next page

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

Benchmark Indices

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%

India, Deliv ered, Duty Paid, Mumbai (Rs/tonne) 35,850 +1.6% 36,137 +0.8% 36,273 +0.4% 36,323 +0.1%

Benchmark Indices

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%

India, Delivered, Duty Paid, Mumbai (Rs/tonne) 29,459.75 -2.6% 29,170.00 -1.0% 33,858.25 +16.1% 36,145.75 +6.8%

TSI Weekly Steel Hot Rolled Coil Reference Prices (change week-on-week)

TSI Hot Rolled Coil Monthly AveragePrices (change month-on-month)

April 4-10

April

Apr 25-May 1

February March

April 11-17 April 18-24

January

55

60

65

70

75

80

85

May03,

2014

May31,

2014

Jun28,

2014

Jul26,

2014

Aug23,

2014

Sep20,

2014

Oct18,

2014

Nov15,

2014

Dec13,

2014

Jan10,

2015

Feb07,

2015

Mar07,

2015

Apr04,

2015

May02,

2015

May30,

2015

Jun27,

2015

Jul25,

2015

Aug22,

2015

Sep19,

2015

Oct24,

2015

Nov21,

2015

Dec19,

2015

Jan16,

2016

Feb13,

2016

Mar12,

2016

Apr09,

2016

US Steel Mill Capacity Utilisation (%)

Source: AISI
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April 2016

Northern & Southern EuropeIn the absence of competitive imports, European steel producers were

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

Having reached selling prices of 360/tonne for HRC at the beginning ofthe month, North European producers started to lift their offers to be-tween 380-390/t. It took time for this prices to trickle down into the spotmarket, as many buyers initially stepped back from the market beforecommitting to the new, higher price level. But as mills delivery lead -times began to stretch into July on the back of limited availability, newasking prices were accepted and TSIs North European HRC indexedged up on stronger transaction prices to finish at 388/t.

Towards the end of April, ArcelorMittal announced new list price increas-es, 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 the400/t mark. This was soon reflected in spot prices in the first few daysof May, when TSIs index jumped to 402/t.

During the first half of the month, HRC prices in Southern Europe shad-owed the price level in Northern Europe, rising to 360/t and close to380/t towards the end of April. Overall, market activity was slow duringthe month, as buyers took time in accepting each new price hike.

A number of Italian producers were heard to withdraw their offers in thefinal 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 inprices too steep, some deals did indeed conclude at this level.

According to the European Steel Association (Eurofer), finished steelimports increased by 23% year-on-year in Q1 2016. China, the largestexporter, together with Russia, Ukraine, South Korea and Turkey ac-counted for 65% of imports over this period. Imports from Turkey regis-tered a significant increase compared to 2015, as flat product importsrose by 257% in Q1 this year.

Data from the German Association of Steel Distribution (BDS) showedthat flat steel inventories in the country ticked up to 1.37 million tonnesin March, although this was still 6% down y-o-y. Flat product sales bysteel distributors remained practically flat m-o-m at 562kt (-3% y-o-y).

The Eurozone Manufacturing PMI showed a slight increase to 51.7, withmixed regional performances. Whilst the manufacturing sector in Ger-many, Spain and Italy continued to expand, Frances PMI slipped to a12-month low of 48.0.

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

2016 year-to-date import volumes (including Aprils preliminary data)totalled 3.85 million metric tonnes, -31% compared with the same periodlast year.

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

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

IndiaAfter the surge in domestic HR coil prices in March, April activity was alittle more subdued, with spot prices in the domestic Mumbai marketmarginally higher month-on-month.

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

-30

-10

10

30

50

70

90 N. Europe S. Europe

Source: TSI

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

1

1.1

1.2

1.3

1.4

1.5

1.6

1.7

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

Mar-16

Source: BDS

German Distributors' Flat Steel Inventories (million tonnes)

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

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

Imports Exports Source: Eurofer

EU Flat Steel Imports vs. Exports (million tonnes)

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

May-15

Jun-15

Jul-15

Aug-15

Sep-15

Oct-15

Nov-15

Dec-15

Jan-16

Feb-16

Mar-16

Apr-16

US Flat Steel Imports (million tonnes)

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


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April 2016

AsiaThe combination of a pick up in infrastructure projects and real estateinvestment in China, together with a number of mill shutdowns, contin-ued to support bullish sentiment in the Chinese steel market, fuelling a

rally in domestic and export prices.

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

With the short-term availability of Chinese-origin HRC limited, TSIsASEAN imports index reached US$479/t by mid-month, US$92/t aboveof where it started April. It reversed its course thereafter, as traders,spooked by weakening spot and futures markets in China quickly cutoffer levels. The index finished April at US$465/t, a staggering 70%increase over its 2015 low, recorded towards the end of last year.

Chinas steelmaking capital, Tangshan, commenced its emission cutsahead of the Horticulture Expo this month, ordering output reductions ofup to 50%. However, the recent price spike also motivated some of therecently loss-making mills to reopen. Haixin Iron and Steel Group, pro-ducing around 5 million tonnes of steel in its heyday, was taken over byanother private company Jianlong Group. Local media reported that theplant was to be reopened on April 30.

Chinese news agency Xinhua reported that Hebei, the steelmakingheartland in northern China, would ban reopening of steel mills thatwere previously ordered to shut down and step up its monitoring of thesteel capacity coming on stream.

Despite these measures, monthly Chinese crude steel production hit70.65 million tonnes in March, up 3% year-on-year, data from the WorldSteel Association showed.

Chinas steel purchasing managers index (PMI) moved above the 50-points threshold for the first time in two years, as the index jumped to57.3 in April, up 7.6 points in a month. Sub-indices including production,new orders and new export orders all posted large increases, whilefinished product inventory continued to shrink, implying that the marketwas improvingin what has traditionally been the busiest season.

Trade Data

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 Febru-ary, China Customs data showed. The country has exported 27.83 mil-lion tonnes in the first quarter of 2016, up 7.9% y-o-y.

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

TurkeyWith global steel prices continuing to strengthen and a lack of competi-tive imports, Turkish steel producers repeatedly hiked their offers withasking prices moving firmly above the US$500/tonne mark by the end ofApril, and some mills were quoting as high as US$550/t.

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

TSIs domestic HRC index finished April at US$514/t, up US$74/t in amonth, having gained over US$200/t from the start of the year.

According to news reports, Turkish producers Erdemir, Toscelik andColakoglu withdrew their request for an investigation of HRC imports

and the Turkish ministry of economy cancelled already introduced tran-sitionary measures. The investigation into HRC imports from China,Russia, Ukraine, France, Romania and Slovakia started in January2015 and provisional antidumping duties were imposed in August 2015.

Derivatives & FuturesThe front-month swap for SGXs cash-settled ASEAN HR coilcontract (basis TSI) was at a US$12/tonne premium to spot pric-es, as of May 10. 2016. The contango (chart below) is relativelyflat for the remainder of the year and into 2017.

With steel prices surging and then experiencing a correction atthe end of the month, the forward curve saw similar rises andfalls. A Q2 2016 swap traded on April 28 at US$445/tonne for 3kt,around US$20/t higher than the current curves valuation (May10).

The North European HR coil swap (basis TSI) curve was in back-wardation on May 10, 2016 (see page 4). Swaps throughout the2016 period were marked at 400/tonne and then dropping to390/t over the 2017 contract months.

35.0

40.0

45.0

50.0

55.0

60.0

250

300

350

400

450

500

550

600

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Jan-15

Feb-15

Mar-15

Apr-15

May-15

Jun-15

Jul-15

Aug-15

Sep-15

Oct-15

Nov-15

Dec-15

Jan-16

Feb-16

Mar-16

Apr-16

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

Sources:TSI, CSLPC

ASEAN HRC Imports Prices vs China's Steel PMI

0

1

2

3

4

5

6

7

8

910

11

12

Mar-15

Apr-15

May-15

Jun-15

Jul-15

Aug-15

Sep-15

Oct-15

Nov-15

Dec-15

Jan-16

Feb-16

Mar-16

Source: China Customs

Chinese Finished Steel Exports (million tonnes)

350

360

370

380

390

400

410

420

430

440

450

Mar-16

Apr-16

May-16

Jun-16

Jul-16

Aug-16

Sep-16

Oct-16

Nov-16

Dec-16

Jan-17

Feb-17

Mar-17

Apr-17

May-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

Dec-17

Jan-18

Feb-18

Mar-18

31-Mar-16

06-Apr-16

10-May-16

Source: SGX

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


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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 markettransactions worldwide.

Transaction price data is submitted confidentially to TSI online by companies buying and selling a range of relevant steel, iron ore, scrap and cokingcoal 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 Eu-rope and Asian HRC steel futures and swap contracts cleared on the Singapore Exchange (SGX). Contracts settle against the monthly average ofTSI'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 ofthe service are available at www.thesteelindex.com.

This information has been prepared by The Steel Index ("TSI"). Use of the information presented here is at your sole risk, and any content, materialand/or data presented or otherwise obtained through your use of the information in this document is at your own discretion and risk and you will be

solely responsible for any damage to you personally or your company or organization or business associates whatsoever which in anyway resultsfrom the use, reliance or application of such content material and/or information. Certain data has been obtained from various sources and any copy-right existing in such data shall remain the property of the source. Except for the foregoing, TSI retains all copyright within this document. The copyingor redistribution of any part of this document without the express written authority of TSI is forbidden.

April 2016

Contact The Steel Index (TSI)

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Marina Maliushkina

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TSI on the marketMayEuropean steelmakers seem to be confident that the price rally in theregion is set to continue. Buyers, who were previously relying on im-

ports, are now forced to switch to domestic material and some havetrouble securing necessary volumes, with the situation reportedly themost difficult in the HDG coil market. With mills delivery lead-timesstretching into the middle of the summer, steelmakers appear to havean upper hand in negotiations at the moment, and their new target forHRC prices across the continent seems to be 450/tonne.

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 1.5billion tonnes to 1.48 billion tonnes (-0.8% year-on-year) after noting acontraction of 3% y-o-y in 2015. A slowdown in China is expected tocontinue, but steady growth is predicted in the NAFTA region and theEU. For 2017, the Association forecasts an improvement in steel de-mand in all markets except China.

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

noted that prospects for 2016 in Europe are relatively positive, withoverall growth in steel using sectors expected to be 1.9% y -o-y. The automotive sector isforecast 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 remainunchanged from last years 152 million tonnes, partly attributed to stock overhang at thestart of the year.

Market participants in Asia expressed their concerns about the future performance of Chi-nese steel markets with the rainy season approachinga period traditionally associated withlow steel demand. With recent increases in steel output, the potential for a supply/demandimbalance leading to a price fall is fostering an increasingly bearish outlook among somemarket participants.

Despite recent reports of an environmental incident, allegedly linked to Formosas steel millin Vietnam, factorys operations remained unaffected. Currently re-rolling slabs, the mill isexpected to start its first blast furnace in June.

275

315

355

395

435

475

515

Northern Europe

Southern Europe

European HRCoil Steel Prices (/tonne)

Sources: TSI, LCH.Clearnet (forward)

Historical Forward
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Tsi Monthly Steel Review April 2016

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