ASIAN AVERAGE CARBON STEEL PRICES - LATEST FORECASTS FROM MEPS

In the flat products category, the underlying momentum of Chinese industrial production and construction demand is still good. The Japanese market is becoming tighter as distributors' stocks of strip products fall. An inventory overhang in the distribution sector in South Korea is taking time to clear. Sales are dull against increased capacity. The Taiwanese market is strengthening. This mildly positive sentiment and escalating input costs prompts us to upgrade our previous regional forecast and predict rising prices for several months ahead.

In springtime, however, we expect some oversupply to occur in China and South Korea. This could put negative pressure on selling values across the region to mid year and slightly beyond. The threat from Chinese exports could dull regional figures until the summer. As activity in the industrialised nations picks up further in the second half of this year we forecast a revival in the volume of Chinese exports to Western nations. This should take some pressure off the Asian markets and provide opportunities for price gains to near $US600 per tonne for the MEPS Average Flat Products Price by the end of 2007.

The outlook, however, is uncertain and heavily dependent upon the actions of the Chinese government in reducing the current export rebates available to local mills

Underlying demand for long products, in China, is firm but being offset to a certain extent by capacity increases. Japanese constructional and civil works activity is only fair. South Korean sales are slowly recovering. The upward price tendency continues in Taiwan. We forecast slight price improvement in the Asian average price over the next few months as the impact of raw material costs are passed to customers.

The threat of oversupply is likely to limit price gains up to mid year and into the weaker demand conditions during the summer months. Stronger export volumes from China as the producers target Western customers in the autumn, should take some of the pressure off regional prices in the second half.

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