COMPOSITE  STEEL PRICE - LATEST FORECASTS FROM MEPS

WORLD (GLOBAL) - ALL PRODUCTS COMPOSITE CARBON STEEL PRICE

The MEPS - World all products price in June slipped by 1.2 percent. This was mainly due to Chinese suppliers exporting as much material as possible prior to the imposition of an export levy on hot rolled steel products on June 1. This created significant oversupply in North America (already suffering from high inventory levels). The EU market was also adversely affected.

As a consequence of the new conditions in China, which affect global markets, our previous forecast has been downgraded this month. The slight upturn (predicted in May) is not now expected to occur through the remainder of 2007. Reasonably firm construction demand around the world should reduce the impact of falling scrap prices on global long product values. Strong flat products consumption in Asia should keep selling values firm in the region. Opposing price trends in the US and EU are likely to counter each other. The net result is a forecast for slightly rising global figures in 2007 - falling slightly in 2008.

EU - ALL PRODUCTS COMPOSITE CARBON STEEL PRICE

The MEPS - EU all products price, this month, fell by $US22 per tonne. Both flat and long products went into decline. Oversupply in the flat products segment, from an influx of foreign material over the past few weeks, pushed transaction prices lower in the strip mill categories. A recent decrease in scrap costs was responsible for customers in the long products segment demanding lower transaction figures.

In the final quarter further cuts in long products selling values are predicted for seasonal reasons as cold weather restricts building and construction projects. Flat products are likely to be steady. The all products figure is, therefore, expected to show a $US30 per tonne reduction in the final trimester and into the early part of 2008, prior to stabilising for the remainder of the forecast period.

NORTH AMERICA - ALL PRODUCTS COMPOSITE CARBON STEEL PRICE

The MEPS - all products price in June fell by one percentage point. This was below our expectations. We now forecast further reductions through the third trimester. Strip mill product prices will suffer from oversupply in the market and long product figures are cut as the producers reluctantly pass on some of their lower input costs to customers.

A steady all products price improvement is then forecast for the final quarter and into the first half of 2008. Domestic demand should have improved in the consumer goods and construction sectors of industry. Over the following three trimester, the flat and long product sectors are unlikely to be subject to substantial import pressure. A weak currency, coupled with relatively low domestic prices will not make this region a particularly attractive market for Asian, East European or South American exporters.

ASIA - ALL PRODUCTS COMPOSITE CARBON STEEL PRICE

The MEPS - Asian all product price was stable in June - slightly down on our prediction last month. Most of this could be attributed to currency exchange rate movements against the US dollar. Flat product prices fell slightly as several strip sector prices drifted lower. Long product values eased upwards - mainly structural shapes.

We have downgraded our May "all products" forecast -principally due to weaker conditions likely to prevail in the flat products segment. Considerable oversupply is now expected in the strip mill sector in China with the introduction of the export levy. New capacity, due to come on stream in the near term, was already likely to put negative pressure on prices. We now believe that the Chinese mills will not be in a position to significantly lift their export values into the Asian region. This will probably lead to only a slight "all products" price improvement for the rest of the year and a modest decline in 2008 in the flat products segment. Marginally higher prices are probable for long products over the forecast period.                                                        03.07.2007

Source: MEPS - STEEL PRICES ON-LINE (regional steel price tables & forecasts)