CURRENCY EXCHANGE RATES WREAK HAVOC IN GLOBAL STEEL MARKET

The MEPS average Hot Roiled Coil price for the BRIC countries declined in October by $US75 (10 percent), month on month, to $US633 per tonne. This reduction is almost entirely the result of currency exchange rate movements – particularly the strengthening of the US dollar against most major currencies.

Russian selling values have become competitive in global markets and are closing in on ex mill prices in China. Indian figures are now well below the average for the rest of Asia, when measured in US dollars. Currently, Brazilian prices are broadly in line with those in North America. Under normal circumstances, Brazilian figures are some of the highest in the world.

If the US dollar remains strong the pattern of trade in the world could change significantly. Imports could start to flood into North America, Japan, South Korea and several EU countries. Russian and Chinese exporters could be the main beneficiaries. Shortage of raw materials could restrict Indian export sales. Weakening of the Brazilian Real may help the domestic producers to restrict a surge in imports in the short term.

Since the beginning of the month, when MEPS determined its currency exchange rate, the US dollar has weakened slightly. The problems with sovereign debt in several EU countries may be closer to being solved. However, a strong US currency is likely to be a feature of world trade into early 2012.

The MEPS BRIC average price for the benchmark hot rolled coil product has tracked the MEPS Asian value quite closely over the past few years. This month, there has been a disconnect between the two – with Asian average values almost $US50 per tonne above the BRIC figure. The MEPS global average hot rolled selling price, this month is near $US60 per tonne higher than the BRIC average.

Source: MEPS - Developing Markets Steel Review  and MEPS - International Steel Review

Also see -BRIC Steel Prices Online

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