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Brazilian finished steel price sentiment weakened in June because of slowing demand and raw materials prices declining to levels prior to the start of the Russia-Ukraine war, S&P Global Commodity Insights monthly steel sentiment survey showed.
A survey of Brazilian producers, distributors, traders, and end-customers at the beginning of June showed that the index for finished steel price development dropped to 54, from 67.05 in May, reaching its lowest indication since December 2021. The index had strengthened over the first five months of 2022.
In general, readings above 50 are interpreted as bullish, and readings below 50 are bearish. A reading of 50 suggests no change in the sentiment.
About 73% of the surveyed consumers expect finished steel prices to decline through the month, while 26% consumers and 88% producers anticipate stable June prices.
Brazilian flat steel makers slashed prices through the week ended June 10, as competition among mills became fiercer amid lackluster demand.
“Demand is not showing recovery signs, it is only falling,” said a mill source about hot-rolled coils.
Mills were initially looking to maintain cold-rolled coil and hot-dip galvanized sheet prices, but the lack of bookings flashed a green signal for a price war, the source said. “Overall, the price has already fallen 10% and it is still on the downtrend.”
Platts assessed Brazil’s domestic HRC down 9.2% week on week at Real 5,900/mt, or $1,187/mt June 10, ex-works, excluding taxes, based on a Real 5,700-Real 6,100/mt range.
Higher imports were also pressuring HDG and CRC prices, although they did not seem to affect HRC pricing.
Brazilian domestic rebar was stable in the week to June 10 on healthy demand, although increased imports by construction companies pressured prices.
Platts assessed Brazilian domestic 10 mm rebar unchanged week on week at Real 5,100/mt, or $1,024.10/mt, ex-works, excluding taxes, based on a Real 5,000-Real 5,200/mt range.
Several Brazilian construction companies have been pursuing joint import operations to boost rebar inflows after the government cut rebar import tariff to 4% in May, from 10.8%.
Brazilian rebar was at a 22.6% premium to the Turkish rebar delivered price at Brazilian ports after customs clearance of $834.99/mt, according to S&P Global data. The freight rate June 10 was $48.21/mt, while the exchange rate was Real 4.98/$1.
About 50% of the respondents expect raw materials prices to stabilize, while 37% expect further declines, particularly in domestic pig iron and scrap.
Brazilian ferrous scrap suppliers saw prices decline for the second straight week, falling by a total Real 150/mt as of June 13. The suppliers expect scrap prices to drop as much as Real 400/mt in the second half of June.
The general market sentiment is that steel purchases and distributor sales will remain weak, leading to elevated inventory levels with an index reading of 64 in June, down 1.88 points from May.
Most respondents expect stable production levels despite weak local demand, as mills continue to fulfil export allocations.
Source: Platts