Key drivers behind tinplate price for the second half of 2013

Behind our view of a lower tinplate contract price for the second half of 2013 it’s also the expected decline of Europe cold-rolled steel price, as we forecast a -5% average annual decrease during 2013. This will be a driver behind the expected tinplate spot global price decreases, especially during the second half of this year. Furthermore, import competition will remain high in the Europe tinplate market, mainly from material of Asian countries. Given the low capability utilization rates in Europe, high import supply, and lower cold-rolled steel prices, it will be difficult for mills to have a high bargain power in the upcoming tinplate contract price negotiations.

We anticipate iron ore price could register an average annual increase of 4.5%, while we expect coking coal to register a modest decrease of -6% in 2013. It is to be noted the difference in growth of iron ore and coking coal (which had been historically related) comes from structural changes for these raw materials. The iron ore supply is expected to be more restrained than coking coal in 2013. The first factor is that India, the third-largest iron ore exporter, has suffered export and mining bans which have translated into a severe cutback in iron ore supply. Meanwhile, supply of coking coal has increased, with Australia being the main source. Furthermore, China consumes more than half of seaborne trade in iron ore, which has also increased iron ore price, as India was one of the main sources of iron ore in China. Meanwhile, coking coal has as main consumers Japan and South Korea, which prefer to buy in long-term contracts, thus making less volatile the price of such steelmaking material.

Also the EU economy is expected register a marginal recovery during 2013, with a growth of 0.2% in its GDP during this year, after a -0.2% decrease registered during 2012. This weak outlook will negatively impact tinplate spot and contract prices in Europe during 2013.