Euro weakness pushes Ukrainian steelmakers to cut prices

Ukrainian export prices for finished steel products (Black Sea) have fallen USD 15-30/t (-2-4%) since the beginning of May, as data aggregated by Metal Courier imply. Prices for rebar and its semifinished product, steel billet, declined the most, 4%, to USD 635/t and USD 583/t respectively, while prices for flat products dropped 3% on average.

Roman Topolyuk: With the weakness in export prices, average quarterly prices should be flat in 2Q12 qoq or down 2-3% depending on the product. The trend is worse than we expected, though May is traditionally the start of a slow season for steel, typically reversing in August. On top of lower steel consumption in Europe and the threat of a global slowdown, recent euro depreciation made purchases of construction steel in the EU more preferable for Middle Eastern and African buyers, which in turn pushed CIS producers, including Ukraine, to cut prices. The news is negative for Metinvest (METINV), implying a further drop in margins (the company posted an EBITDA margin of 16.7% in 1Q12).