Gas price movements - Europe and the USA

US natural gas prices have behaved very differently from European and other gas prices during 2011. US prices [Henry Hub spot prices, Louisiana, fell significantly over this period, from $162 to $114 / 1000m3, whilst European prices [Russian gas, delivered to German border] rose markedly, from $331 to $436 / 1000 m3. For actual prices, see http://www.steelonthenet.com/commodity_prices.html for prices in Europe and http://www.steelonthenet.com/files/natural_gas_prices_USA.html for prices in the United States.

The difference in price behaviour seems to be explained by the shale drilling boom in the United States - which may soon swell the nation’s underground storage network - and which is resulting in excess gas supply.

Nonetheless, with a difference in prices that is now close to four-fold, it seems clear that regional supply and demand has a major influence on the pricing of this particular commodity.

Nickel through the $25,000 barrier

Whilst there was much comment in mid-2008 when nickel prices peaked at $20,000 per metric tonne, the metal price rose above $25,000 just recently. With suspension of BHP's mining operations in Western Australia after a recent fatality, the supply demand balance for nickel is starting to look as if further price rises might be expected.

Engineering steel in Europe

Steel industry advisers Metals Consulting International have just published an in-depth review of the European engineering steel sector.

In a February 2010 report of ~50 pages, the authors discuss the supply and demand for engineering steel.

Across Europe, 53 producers of engineering steel bar [also known as special bar quality steel, or SBQ] are identified. With a handful of these plants having engineering steel bar capacity at or over 500kt/year (facilities that are located in Germany and in Eastern Europe), average European plant scale is close to ~240kt with the smallest average size being found in Central Europe. Total European output of all 53 facilities is assessed at ~8.4 mt of production in 2009.

Whilst Germany dominates European SBQ trade as a main importer, and Russia is notable as a major exporter, European demand for engineering steel bar is estimated at 8.2mt. This is for 2009, against a world consumption estimate of ~34mt. The European demand of 8.2mt is some 37% down on 2007 consumption levels of ~13mt, with SBQ demand especially hard-hit in Western Europe. SBQ demand collapses since 2007 are assessed as near to ~50% in Western Europe, under 10% in Central Europe but intermediate in Eastern Europe, recent patterns in automotive output being largely responsible for these changes.

Looking forward, with year 2009 consumption very much seen as the ‘low point’ in European engineering steel demand for the period 2007-2013, a slow recovery is foreseen in European SBQ demand. This recovery, whilst not anticipating overall European return to 2007 demand volumes until after 2012, assumes much faster recovery in Central Europe [by 2010] and in Eastern Europe [by 2011], with a return to 2007 production levels in Western Europe only expected around 2014. Gradual relocation of automotive component manufacture to modern large-scale plants in the lower labour cost countries of Central and Eastern Europe is the principal factor shaping this recovery in favour of the former Eastern bloc states.

A number of industry scenarios are outlined for the European engineering steel sector across the medium term. These include supply side consolidation in Germany; passive exit from SBQ production by marginal suppliers wishing to optimise their product mix; large-scale SBQ facility investment in Central Europe; medium-scale SBQ facility investment in Eastern Europe; selected engineering steel asset sales in Romania; outright SBQ business disposals by some of the volume steelmakers; and facility restructuring at selected sites. Probabilities are assigned to each of the scenarios. Reduction of competition in engineering steel production through European M&A activity or plant closure with relocation across Europe from West to East and / or through passive exit from SBQ steel production are judged as high probability outcomes.

Priced at Euro 995, the new report is available for purchase from http://www.steelonthenet.com/SBQ.

blogger@steelonthenet.com

NOTES

About Metals Consulting International Limited [‘MCI’]

Metals Consulting International Limited is a UK-based firm of management consultants who provide clients worldwide with independent consulting services relating to the international metals industries. Services include assistance with steel sector strategy formulation, due-diligence, restructuring, modernisation, business planning, performance turnaround and profit improvement.

About Engineering Steels [‘SBQ’]

Also known as special bar quality or SBQ, engineering steel can be defined as steel that moves [rotates, twists or bends] rather than stand still whilst in use – usual applications extend to crankshafts, gearbox gears, suspension arms, automotive springs and hydraulic components.

Polish steel industry - supply and demand review

Steel industry consultants MCI have just published a review of the steel sector in Poland.

In an October 2009 report of ~45 pages, the authors discuss the supply of demand for steel, including recent history and current industry structure and ownership. The report looks at current steel capacities in flat, long and tube products; at production, capacity utilisation, environmental issues, productivity, demand levels and demand segmentation. The authors also discuss future Polish steel consumption levels and market trends. Priced at Euro 395, the new report also outlines an industry SWOT analysis; and discusses some of the management challenges ahead.

For further information, visit Polish steel industry report.

blogger@steelonthenet.com

2007 and 2008 world steel demand forecast

In their 'Short Term Outlook' published today, the International Iron and Steel Institute (IISI) predict that year 2007 world steel demand will be just short of 1.2 billion metric tonnes. Steel consumption in 2008 is expected to grow by 6.8%. This means that 2007 consumption of ~1198 mt will increase to ~1279 mt in 2008.

Brazil, Russia, India and China lead the growth in steel demand, accounting for ~77% of world demand growth in 2007 and ~71% of the expected growth in 2008.

For full IISI report, see http://www.worldsteel.org/index.php?action=newsdetail&id=213

blogger@steelonthenet.com