Tuesday, June 20, 2006

Have Steel prices peaked? a report from India

A report by A.S. Firoz in the Indian Financial Express has an article on steel pricing in the subcontinent that explains why prices there have failed to rise to the extent seen in Europe and North America. It is certainly not due to a lack of growth in the manufacturing sector, or demand for steel which has achieved a respectable 8% increase this year.

Whilst he highlights a number of local factors that go a long way to explain the geographical variations in steel pricing, his conclusions have global implications.

Strong demand in Europe and the USA, has gone a long way to overcome the threat of a steel glut from China. However with production likely to increase by some 18% against a demand increase (in China) of only 4 to 5%, the current differential of around $170 per tonne for hot rolled strip will invevitably impact at some stage upon prices in the West. European and North American steel mills, with full order books may see this threat as distant, but historical experience teaches us that Steel prices can be very fickle.

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