Brazilian Flat Product Prices Stabilise, while Mexican Values Fall

Brazilian Flat Product Prices Stabilise, while Mexican Values Fall

In Brazil, prices of coil and plate are relatively steady, amid reduced purchasing from distributors and depressed end-user consumption. A number of observers express concern regarding the government’s handling of the country’s coronavirus outbreak and the economy’s ongoing problems.

Domestic steelmakers are likely to attempt to lift their selling prices, in the near term. The proposal is due, in part, to the weakness of the local currency. The Brazilian real has depreciated substantially against the US dollar since the start of the 2020. At the beginning of January, the USD/BRL exchange rate stood at around 4.0. It is currently trading at approximately 5.5, although this is stronger than the 5.9 it reached earlier this month.

Brazilian steel traders caution that price increases by the local mills have the potential to reinvigorate interest in imported material. Service centres are adopting ‘wait and see’ positions, citing low end-user demand and concerns related to the Covid-19 pandemic. They suggest that passing on any price hikes through the supply chain will prove difficult, particularly to those operating in automotive-related sectors. Confidence is low regarding the prospects for a substantial improvement in business conditions, in the third quarter.

In the long products market, MEPS recorded price reductions this month. Domestic mills are offering concessions as they seek to attract new orders. Activity in the construction industry – a major steel-consumer of long products – has weakened noticeably, due to measures to combat to spread of the coronavirus. Sentiment amongst steel buyers is weak. Supply continues to exceed demand, despite output cuts by local steelmakers.

Tough trading conditions persist in Mexico

Weak purchasing activity exerted downward pressure on Mexican flat product prices, this month. Companies operating in steel-intensive industries, that were either closed or are operating at a reduced capacity, hold sufficient inventory to cover their immediate requirements. A number of steel buyers expect that prices will continue to fall, in the short term, despite the upward trend being witnessed in the US market.

Mexican long product mills were forced to reduce their offer prices, in May, to secure orders. Exporting material north of the border is difficult, at present. Construction-related activity is limited. Local distributors report weak sales volumes, and many are pessimistic about a pickup, in the coming months.

Source: MEPS International Ltd.

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