COMPOSITE  STEEL PRICE - LATEST FORECASTS FROM MEPS

WORLD (GLOBAL) - ALL PRODUCTS COMPOSITE CARBON STEEL PRICE

The MEPS - Global all products price in September was slightly above our estimate made in July. This was the result of an unexpected rise in Chinese figures for both flat and long products. Supplies became tight after the steel market picked up as activity improved when the temperature cooled from the hot Summer weather in China. A period of price stability in the global price is anticipated to the end of the year. A modest rise in average flat products values (mainly due to Asia) is expected to be countered by a decline in the EU and North American markets. In 2008, we forecast a price improvement across all regions as the mills push for higher selling figures to compensate for rising raw material costs. The pricing scene is forecast to peak in mid year as oversupply develops across the globe. This prediction is based on an expected slowdown in demand as the economies in the industrialised nations weaken, together with a degree of oversupply from new plant installations - mainly in China.

EU - ALL PRODUCTS COMPOSITE CARBON STEEL PRICE

The September EU - All products price was down on the July figure and also below our prediction two months earlier. Both flat and long products values fell further than we anticipated. Substantially higher import volumes in mid year weakened the cold rolled and coated categories. Demand for wire rod and reinforcing bar decreased over the holiday period due to poor weather conditions as activity in civil engineering works was curtailed. We expect further price slippage to the end of this year - mainly in the long product categories. Demand is predicted to pick up early in 2008 and the mills will also push for higher selling figures to recover all or some of higher input costs. In mid year, the construction sector is likely to slow after the boom of the past two years. The rest of the economy is also likely to slow down. Steel demand should fall and prices may start to slip towards the end of the year.

NORTH AMERICA - ALL PRODUCTS COMPOSITE CARBON STEEL PRICE

Despite the prospect of weak economic conditions in the United States in the coming months we expect a modest steel price revival. This dichotomy is brought about by our belief that the inventory drawdown in most product categories is almost complete. Furthermore, the import threat has been reduced dramatically for certain products. The declining domestic prices over the past six months and a fall in the value of the US dollar against most major currencies have made the market much less attractive to foreign suppliers. Moreover, the threat of a new wave of antidumping actions is making exporters more conscious of the problems of making very low offers into North America.

The price improvement is forecast to extend into mid 2008. At that time global oversupply is likely to have developed. This could lead to higher import volumes and reduce the potential for any further upward price movement in the flat products segment. Traditionally, long products prices decline in the second half of the year.

ASIA - ALL PRODUCTS COMPOSITE CARBON STEEL PRICE

After the price explosion in September, we forecast no major gains in the MEPS - Asian all products price in the near term. A small improvement is possible as the producers push for higher prices to cover the anticipated increase in raw material costs. Demand for both flat and long products is expected to continue to expand over the next twelve months. However, we believe that the rate of growth in capacity and output will be faster than consumption - particularly in China. Furthermore, exports to the West from China are likely to decline in volume and the excess will be channelled into the domestic market. This will probably have the effect of slowing down any price increases. By the second half of 2008, the global market could be entering a period of oversupply which will hold back the price acceleration seen since the start of 2006.