ASIAN
AVERAGE CARBON STEEL PRICES
- LATEST FORECASTS FROM MEPS
Constantly increasing domestic steel
capacity is undermining steel prices in the Chinese flat products
segment. In Japan, oversupply has been a problem in recent months.
The mills are now considering steps to rectify the situation by
cutting back on output. Similar pictures are being reported in South
Korea and Taiwan.
Oversupply across the region is likely to
lead to further price reductions over the next few months for all
commercial grades of steel. Cuts in production are anticipated in
the final quarter in Japan, South Korea and Taiwan. This should
signal the mills intent to balance supply and demand by the end of
the year. We forecast a fall in transaction prices over the next
three months - followed by an upturn in 2006. This assumes that the
Chinese will not flood the region with their excess supply but
forward some of it to the EU and North America. A modest price rise
is anticipated during the first half of next year.
In the long products category average
prices actually went up over the past two months - partly on the
back of stronger international scrap prices. The increases in raw
material costs in Asia have been less dramatic than in North America
and the EU.
Excess supply is likely to be a key factor
in the pricing scene over the next six months. With the exception of
China, demand is quite mediocre in the building and construction
segments across the region. We, therefore, forecast modest price
declines up to the early months of next year. This should be
followed by a revival after the Chinese New Year if the mills are
able to export some of their oversupply to the US market, to meet
the anticipated upturn in demand for construction in that country.
Taiwanese and Japanese demand may also be improved at that time.
However, in the background, there is always the fear of too much
supply from the Chinese mills dampening the prospects for a price
revival in the region.
