8 November 2018
- Short-term supply conditions are bullish. We have picked up some tightness in spot supply. This is partly attributable to lower Chinese imports, which are expected to tighten even further in the coming week/weeks given the recent events in Australia. This has been gradually picked up by our forward supply indicator which is also showing a temporary tightness. However these positive developments will be partially mitigated by the persistent de-stocking of steel mills.
- Short-term demand conditions are bearish. The previous bullish narrative has weakened, with margins under pressure and steel rates coming off recently. Our Domestic vs. Import Arb. indicates a reduced preference for seaborne ore and should add further downward pressure on prices. However, our Cash and Carry Arb still reflects firm demand in the short term.
- Short-term macroeconomic conditions are bearish. The latest manufacturing data indicates renewed weakness in downstream manufacturing steel demand. This is expected to provide further drag on the flat steel products. While we await new construction data, initial estimates of our construction demand index have remained marginally higher. Given the recent weakness in the dollar, currency conditions have strengthened. However, it has to strengthen further for our index to flip bullish. Credit conditions have improved and offer some near-term support to prices although they look to deteriorate going into week#46.