China Leads January Surge in Steel Import Licenses

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 |  Includes: AKS, BHP, CLF, CMC, GGB, GNA, MT, NUE, RIO, RS, SCHN, SMSMY, STLD, VALE, WOR, X, ZEUS
by: Michelle Galanter Applebaum
January Imports Increase 80% From Year’s Low
January import licenses rose 10.1% to 1,394,611 tonnes from preliminary December imports of 1,266,392 tonnes to the second highest level in the past 12 months. Nearly 85% of the increase in the month was due to a surge in slab imports, which rose 63% in tandem with a decline in flat-rolled tonnage, which fell 6%. The combination is remarkable primarily because slab imports are running up in part due to lower sheet imports which are in turn driving sheet prices to year-highs.
Chinese Tonnage Surges Some 130% Off the Bottom
Chinese imports rose some 51% to 61,820 tonnes, the highest level since May 2009, led by a whopping 111% increase in flat-rolled. Russian licenses surged in January from 598 tonnes to 85,858 tonnes, and were nearly double the monthly average for 2009. Licenses from Australia rose some 150% to 60,972 tonnes, the highest level since October 2008. Meaningful increases were also seen from Mexico – up some 45% due primarily to a pickup in semi-finished and Korea - up 10.7% due to a jump in OCTG. Brazilian imports dropped some 69% due primarily to surging demand in Brazil’s home market where even CSN stopped shipping to its captive US-based rolling mill as demand and pricing in Brazil outpaced any other single region.
Tubular Imports Jump 22%
OCTG import tonnage rose 52% to the highest level since last May, with Korea stepping in to replace China as the largest source of pipe imports. Line pipe and standard rails also posted meaningful increases, rising 12% and 72%, respectively, with standard rails at the highest level since July 2009. Wire rod and cold-rolled sheets each fell 23%, reverting closer to their monthly averages for 2009.
Outlook
We believe relatively low domestic steel prices and the weak value of the dollar had kept imports in check in the second half of 2009. However, bare inventories and rising input costs have domestic prices on the rebound as of late while the US is running to catch up to surging prices offshore. We expect rising domestic steel prices to raise the threat of imports for the near term.