EU AVERAGE CARBON STEEL PRICES - LATEST FORECASTS FROM MEPS

In the flat products category, MEPS forecast for the next twelve months are little changed from the predictions in November. We continue to believe that the impact of low strip mill prices in the South of the region will percolate northwards over the coming months. Plate values continue to be firm for the superior grades but are likely to slip in the first half of 2007 due to competition from foreign sources. The current price reductions in the strip mill sector are likely to extend well into the middle of next year as customers re-evaluate their inventory levels and import volumes rise due to the strengthening Euro currency versus the US dollar.

In the second half of 2007, we expect the inventory depletion phase to have run its course. Lower prices should make the EU market less attractive to importers. Furthermore, the domestic mills will have implemented output cuts in an effort to bring supply and demand nearer into equilibrium. A price pick up is anticipated towards the end of the third quarter - after the Summer break. Selling values should rise to the end of the year with an improved supply-demand balance.

Bar and rod product prices in Euros are heading downwards for seasonal reasons. However, raw material costs are moving in the opposite direction. As a consequence, the rate of decline in the MEPS - EU Average Long Products Carbon Steel Price over the next few months is forecast to slow down and bottom out in the second quarter of next year. However, the price decrease outlined above is unlikely to affect the medium sections category. Demand continues to be firm. Supply remains tight. Far East competition is quite modest at the moment but could intensify as next year progresses.

As the weather improves in the Springtime we expect our average long products price to increase in line with better demand. This is likely to continue to near to the end of 2007.

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