You may have seen these alternative economic indices making their rounds this past week. The men’s underwear index makes for the most entertaining reading of course but it’s the bake bean index reported by ThomasNet that we found most relevant. Originally reported by the BBC, the notion behind bake beans as a surrogate economic indicator ” cheap, tasty and with a long shelf-life make the hotdog accompanying side-dish an interesting measure of the state of the economy. Here is what the alternative indicators, including bake beans are currently telling us:
Chart Courtesy of the BBC and Nielsen Scantrack
But of course, that’s not interesting enough to us metals enthusiasts (although I am an admitted fan of baked beans). We want to know what the cans tells us about tinplate markets!
The tinplate and TMBP (tin mill black plate) markets remain some of the most elusive if not tightly controlled supply markets of all metals markets in the world today. Dominated by the Japanese, and in particular, JFE, tinplate market prices are set more like iron ore contracts (annually) than they are the underlying raw material markets from which these products originate (cold rolled coil and TMBP grade hot rolled coils). Certainly the European producers such as Thyssen’s Rasselstein and Corus work in a similar manner. And for that matter, the US tinplate producers have enjoyed a stranglehold on domestic prices because of a major anti-dumping case filed in 2000 which will come up for sunset review in 2010 along with a governmental decision in 2011 to continue or revoke the duties. According to one article, the steel can producers (not the tinplate producers) may argue to remove these anti-dumping duties. Based on our own experience sourcing this category, we learned that indeed the domestic market is at a premium to the rest of the global supply base.
According to TEX Report Ltd, JFE has secured $100/ton price increases for Q4 ’09 from buyers in China, Columbia and other SE Asian nations for TMBP. Prices are now in the $900/ton FOB Japan, up $200/ton from 2007. Tinplate prices typically sell at a $150-200/ton premium to TMBP or $1050/ton FOB Japan and have been agreed to by Indonesian and Philippine buyers.
Perhaps the most interesting comments that grabbed our attention though involved the rationale behind JFE’s price moves on TMBP. According to the TEX Report, the Japanese wanted to stabilize the market and a price increase was the only way to do that, potentially as a response to China’s BaoSteel who lowered prices in Q3 of this year. In addition, SteelGuru reported that the Japanese integrated steel mills, have a strong mindset to execute stable tinplate supplies under negotiated term contracts, thereby holding back on spot deals. That’s the second time in less than two weeks we have heard of steel mills publicly acknowledging that they do not intend to honor spot contracts. That is certainly one strategy to try and prop up the price of steel.
But will it work? Perhaps for tinplate and TMBP but we tend to doubt it for the more commodity steel markets at least in the longer term. Only true demand can do that ¦.