Applied Value Q1 2019 Steel Report Overview

NEW YORK–(BUSINESS WIRE)–The Steel Report is a quarterly publication that the Applied Value Group
provides for existing and prospective clients. The Applied Value Group
is not a market analysis firm, but rather a top management consultancy
with extensive experience assisting clients in raw-material consuming
industries achieve cost and capital efficiency through strategy and
operations projects implementing significant ROI.

The Steel Report is a consolidation of market analysis and our
viewpoints based on work we are doing with our global clients across
many industries from construction to automotive to white goods. Its
contents include in-depth analysis and insights on the development of
the US, European and Chinese steel markets as well as forward-looking
market drivers and a six-month forecast. The report focuses on Flat
Steel, but also covers Plate, Stainless, Bar, Wire Rod and Tin Plate
market trends. Each report also contains a special section, which deep
dives a different key topic each quarter and a stock market section,
providing insight into financials of global steel mills.

Q1 2019 Steel Report Overview

NA steel prices continued to plunge in Q4 2018 and have now reached
pre-tariff levels, correcting from the inflated run-up during 2018.
Chinese and European prices have also seen downward movement, posting
15% and 6% Q4 reductions, respectively. Overall expectations are for a
weak Q1 2019 as global demand & economic uncertainty are continuing to
drag prices down.
As section 232 tariffs continue in the US, the
European Commission has formally ratified (as of January 2019) a 25%
safe guard tariff on steel products that exceed import quotas
established in the investigation process.

  • US Flat prices plummeted 13% in Q4 and have now reached pre-232
    price levels as the market continues to correct. US prices are
    projected to see additional decreases going into 2019 as prices
    re-align globally and economic uncertainty hits demand.
  • EU Flat prices decreased 6% in Q4 2018 as inventories increased and
    buyers awaited decisions on newly announced safeguard tariffs.
    Economic driven demand factors will keep EU prices lower in H1 ‘19 but
    supply consolidation and safeguard measures will maintain a floor.
  • China Flat prices saw a major decline of over 11% in Q4 2018 before
    leveling off slightly in December. Trade uncertainty coupled with
    falling demand will likely put pressure on lower Chinese prices in H1
    2019.
  • Q4 saw an increase for most raw material prices, largely on account
    of growing uncertainty around Chinese production. 2019 US HR
    production costs are projected to increase by $13/MT for mini-mills
    and by $1/MT for integrated mills in the US. EU HR steel integrated
    production costs are projected to decrease by €18/MT in 2019 due to
    falling coking coal and iron ore prices.
  • Despite the sweeping 25% tariffs imposed by section 232, US total
    steel imports in 2018 only reduced by 8%, impacting non-EU European
    countries (mostly Russia) and Asia (mostly Korea).
    Steel cost
    increases for buyers in 2018/2019 are a significant impact to company
    EBIT performance, and these margin swings have forced buyers to react
    & re-evaluate supply chain flexibility, optimization and buying
    practices.

About The Applied Value Group

The Applied Value Group combines Management Consulting, Investments, and
Social Entrepreneurship. Founded on a combination of entrepreneurship
and cost and capital efficiency in 1997 by Bruce Grant and Jan Stenbeck,
Applied Value operates out of offices in New York, Stockholm, and
Shanghai.

Contacts

Donald Bly, +1 440 759 3894
email: [email protected]

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