Nippon Steel´s controversial $1.5 billion acquisition of the giant American steelmaker, US Steel, continues its tortuous journey through the labyrinth of US politics and regulatory hurdles. Nippon Steel is currently negotiating with the United Steelworkers (USW), the main union at US Steel. The Japanese firm hopes aims to gain consent from the USW by emphasizing the deal will strengthen the American company’s profitability and finances, leading to stable employment. This comes as steel prices in North America are on a slide as buyers withdraw from the market. As our flat products price graph shows, the price of HRC North America has been in steady decline since mid-December and now sits at $959 per m/t. The downward trend has continued in the first trading days of March and prices are expected to decrease further. MEPS reports the softening in prices has prompted inventories to be replenished by many stockists. The reduction in order placements resulting from buyers who have adopted

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a “wait and see” stance is exacerbating the price falls.

Meanwhile, in East Asia the usual post-Chinese New Year boost in activity is not materialising. Instead, the prolonged period of demand weakness which characterised much of 2023 in both flat and long products is continuing. Low booking activity, high inventories and reduced export sales to other parts of the world are persisting. There are a number of reasons for this: first, end-user demand in all East Asian countries remains fundamentally weak; steel consumption is unlikely to improve to any great extent during the course of the year; and recent economic data indicates an uncertain outlook. One of the key players in the region is Japan whose remarkable stock market surge saw the index hit a new record this week. However, figures recently released by the Japanese Cabinet Office confirmed that Japan had unexpectedly fallen into a recession. Its GDP declined by 0.4% in the fourth quarter of last year, following a 3.3% decline in the previous quarter. Only modest growth is predicted this year. South Korea’s GDP meanwhile grew by 0.6% in quarter four of 2023.

Of course, the East Asian situation will be most influenced by China whose National People’s Congress annual meeting opened on Tuesday of this week. It will be fascinating to see what stimulatory measures the Chinese Communist Party might put in place to reenergise the country´s sagging economy. China’s GDP stood at just 5.2% last year and is predicted to slow further this year. Any stimulatory measures would help to maintain steelmaking activity levels and may, in turn, prompt short-term upward price pressure to both domestic and export steel prices. It is also possible that the Chinese government will continue to apply production limits on domestic mills, on an ad hoc basis. It´s reported that Chinese crude steel output fell by 15% year-on-year in December. Similar measures may alleviate any oversupply fears in the region. MEPS says this will give some much-needed breathing space to East Asian countries, who are hugely exposed to Chinese exports. Irrespective of what happens at the National People´s Congress, steel prices are likely to be subject to upward price pressure as the result of high raw material input costs. Supply constraints, amid reasonable demand, are also helping to sustain the prices of iron ore, coking coal and ferrous scrap. All these factors are putting steelmakers´ margins under strain and they would naturally hope to respond with prices trending upwards.