MEPS FORECASTS GRADUAL UPTURN IN
WORLD STEEL PRICES OVER NEXT TWELVE MONTHS
The MEPS - World Composite
All Products carbon steel price peaked in July 2008 at $US1160 per tonne. In the
subsequent ten months the value fell by more than 50 percent to $US562. However,
the production curbs are beginning to bite as customers start to rebuild
inventories in most regions of the world.
There are now clear signs that steel producers internationally will be
increasing output to meet the anticipated higher market demand. This has, in
fact, already started. Global production of steel in July 2009 was approximately
11 percent down on the equivalent month in 2008. In comparison, steelmaking in
the first six months of this year was almost 20 percent below the figures
recorded in the same period of 2008.
Since May, most steel prices have increased steadily - with the MEPS - World
Composite figure rising by $US49 per tonne (8 percent) over the past three
months. Further growth in transaction values is forecast for the next twelve
months. Steel consumption is expected to expand steadily. Inventory rebuilding
is likely to develop throughout the supply chain from producers to distributors
and end-users. Continued financial restrictions will, almost certainly, limit
the rate of steel price growth in the future. Moreover, the current tight supply
conditions are likely to give way to slightly more availability as the mills
lift output to meet the new market conditions.
A significant proportion of the recent price gain has been made by the flat
products producers across all regions. Government incentives have improved
demand for automobiles through car scrappage schemes. The Chinese government has
extended this activity to cover home appliances.
In contrast, recent price rises in the long products categories have been modest
because much of the output from this segment is scheduled for the construction
industry. This market sector has also received massive assistance from
governments around the world. Unfortunately, it takes longer for approval of
finance to translate into steel purchases due to the need for new design and
often statutory approvals for major projects.
The month of May was the low point in the flat products sector in most parts of
the world. Since that time, the North American market has shown the fastest rate
of price growth. This is partly due to the savage cuts in output since the final
quarter of 2008. Shortages are now being noted for several key products. There
are reports of blast furnaces planning to restart in the near future to meet the
expanding demand. This should lead to a slower rate of price escalation over the
next twelve months.
Strong gains in flat product prices have been reported in Asia over the past
three months as government schemes to encourage replacement of home appliances
and motor vehicles kick in. However, supply has increased in China. Price
reductions are ongoing and more are anticipated in the near term. This will
diminish the rate of growth in prices in the Asian region over the next few
Modest flat product rises have been noted in the EU since May. August is a month
of low market activity but transaction numbers are expected to be lifted in
September and beyond. As in other regions, higher mill activity could restrict
the rate of expansion later in 2009 and beyond.
The MEPS - World Long Products price bottomed out in April, after falling by 50
percent from July 2008. Over the past four months, this figure has increased by
$US34 per tonne (6 percent). Asia has been the best performing region - mainly
due to higher activity in China, where strong investment in infrastructure
development continues. Further gains in the Asain average long products price
are anticipated during the course of next year as construction demand improves.
Recovery in the long products markets in North America and EU has been modest.
In these two regions it is difficult to shortcut the approvals mechanism for
major projects. As a consequence, the pick up in building and construction will
Source: MEPS - International
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