Münster’s Review

RIEN NE VA PLUS

Although we are not in a casino, the price developments in November have shown that price forecasts – even taking into account all factors – remain a view in the crystal ball. So this time I was wrong with my forecast regarding the price development for C-steel flanges.

The prices have fallen massivly. This is due to various global factors that have had a decisive impact on Chinese prices too. Be it the slightly weaker economic situation in Europe or the tense situation between China and the USA due to trade sanctions. Likewise, the collapse of the Turkish Lira and the associated fall in selling prices of the steel industry has had an impact on the general global price decline.

News on flanges

Raw materials prices for P250GH in China started at 5,150 RMB / ton in November 2018. Only one manufacturer granted us the 4% price reduction, which resulted from an increase in the export tax refund, right at the beginning of the month. During the month, this reduction was granted by all suppliers. So far, the development was still “normal” and predictable.

However, after the first decade of November, the price fell further. The reduction continued daily until the end of the month with a total of a whopping 13% in raw material prices. The prices of the material are never equal to 1: 1 with the prices for the flanges, but approximately in a relation of 3: 4. Specifically, this means that the prices of flanges in November have fallen by about 10%. Of this increase, 4% has to be deducted for the changed tax policy, so that the real reduction was 6%.

Situation in China

In China, the situation is unchanged. The country still has a stable domestic market and good domestic demand for steel products.

Furthermore, the country suffers – as in any winter –  extremely on smog situation, which is still a major problem in the heating season despite the massive environmental protection measures. Politics does not deviate from the measures taken, which, in turn, leads to a tense production situation, as has been the case for years, and occasionally leads to extended delivery times. Also for the next months longer delivery times will be be normal.

Forecast or: my view into the crystal ball

There is no explanation for this particular development within the Chinese market apart from the global factors. Nor is there any explanation as to why prices rose 4% at the beginning of this month. Which in turn means that prices fell by about 6% from the beginning of November to the reporting date. After deducting the 4% due to the tax change, a real market-related change of 2%.

A change of this level is by no means extreme and absolutely normal. In fact, the price for P250GH is exactly at the level of December 2017, and thus still at a very high level. It remains to be seen what the coming weeks will bring. In particular, it will be interesting to see how the final EU decision on safeguard measures will affect. Completion of this investigation is expected by the end of February. We can not predict that. But what the development in the course of November and the counter-trend at the beginning of this month shows, is that a reliable forecast, and the associated illusion of the RIGHT moment to buy, is not possible. The fact is, tomorrow we could get information from China that prices have fallen again by 5%. But as well as possible is a message about a 6% price increase.

Our recommendation to you in such an uncertain situation is therefore: buy rather according to your needs than to wait for THE best moment.

If you want to be regularly informed about the latest developments on the market, subscribe to our newsletter here. We will regularly provide you with news about twice a month. Spam-free – promised.

With connecting regards

 

Claudia Münster