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Global steel prices expected to peak before the year end - MEPS
8/28/2008 |
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UK based MEPS said that World steel prices are currently at all time highs. Since August 2007, hot rolled coil average transaction values in North America have risen by almost USD 600 per tonne. EU prices have moved up by approximately USD 530 per tonne and Asian figures have advanced by more than USD 350 per tonne.
MEPS estimates that ¡°The upturn in raw material prices for 2008 has been in the region of USD 350 per tonne. Using this figure, western flat products producers have recovered more than their increased costs. Reduced imports from Asia, coupled with restricted output by some steel manufacturers, have created shortages in the market. Consequently, local mills were able to push through considerable price improvements. This was despite weakening demand in the industrialized nations.¡±
MEPS said that ¡°Long products values also recorded substantial advances in all regions. Escalating scrap costs helped to propel prices higher. Strong demand from the Middle East redirected significant volumes away from western markets as selling figures rocketed in many of the Gulf States. European and Asian companies looked to export to this growing market in order to boost order books. Consequently, local supplies were restricted. This aided the mills' efforts for price advances. US values, however, suffered from declining consumption in the residential building sector.¡±
MEPS added that ¡°Transaction figures are expected to continue climbing in September due to higher raw material costs. However, we predict that the latest increases will signal the peak of the current cycle in western countries as reduced consumption negatively affects demand on the mills. Low construction activity is expected to result in continued cautious buying by service centers. They also fear being left with overpriced material when values begin to fall.¡±
MEPS said that ¡°The weakening economies in the EU and North America will, almost certainly, result in reduced demand in the near term from the manufacturing and building industries. Credit constraints are also expected to limit purchases, particularly from smaller customers. Consequently, selling figures are forecast to soften towards the end of the year.¡±
MEPS added that ¡°Moreover, the reference prices in the US used to calculate scrap surcharges are predicted to drop as they are currently not following market fundamentals. However, these are liable to be realigned early next year. This adjustment should result in steel price decreases from October onwards in this region. Seasonally lower consumption is likely to exacerbate these declines in the long products categories.¡±
MEPS said that ¡°Further reductions are anticipated through the early part of 2009 as the mills are forecast to lower prices in an attempt to fill depleted order books. However, a substantial steel price collapse is not envisaged because exports from east to west are expected to remain restricted.¡±
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