Steel price differentials between East and West soar to record highs

The gap in steel prices between Eastern and Western countries has reached an all-time high. The pace of growth in US transaction values appears to be slowing, partly as demand traditionally wanes during the summer period. However, a cooling in prices is also occurring in Asia. Consequently, the differential between transaction values in the two regions is expected to expand in the coming months.

Import volumes into the US have been steadily rising throughout 2021. Nevertheless, this has been insufficient to keep up with the rapid growth in demand from many steel-consuming sectors. Availability from domestic suppliers is extremely limited, with many buyers put on allocation. Therefore, inventory levels throughout the supply chain remain depleted. Steel mills have been able to implement significant increases in their selling values, as a result.

The price differential between the EU and North America also continues to grow to record levels. Increases in European transaction values stalled, this month. Many stockholders withdrew from the market to reassess their positions after the summer holiday period. A slowdown in Chinese prices also made buyers more cautious about the future pricing direction. Nevertheless, further increases in European steel transaction values are anticipated in September.

The lack of competitively priced import options in Western countries – due to high freight costs, trade protection measures and low availability of steel – is expected to keep the price differentials elevated, between the East and the West, for the remainder of 2021.

Nevertheless, we have reports that the quantity of imports into the EU and US is likely to increase, in the fourth quarter. This should provide some relief to the many customers who have found difficulties obtaining the material that they require, in the first seven months of this year.

These considerable price differentials are unlikely to be sustainable, in the long term. For now, however, they are expected to remain.