Friday, July 21, 2006

Steel price increases should slow down in fourth quarter

MEPS are reporting that despite the current situation pricing on steel products in Europe is likely to ease toward the end of the year.

We are seeing shortages in some areas, particularly galvanised, and lead times for steel strip have been extending. With the annual shutdowns upon us in Europe, this situation is unlikely to ease in the near future. Stockholders are reporting that they are unable to get enough steel to meet demand, and some buyers are ordering at levels above their requirements in an attempt to “hedge” against price increases.

Whilst demand is clearly healthy in Europe generally, it is hard to believe that it exceeds the available supply to an extent that will continue to drive prices up in the long term. Increasing prices in Europe will attract imports which ultimately will begin to apply some downward pressure, and whilst some modest increases may occur in the last quarter it is highly unlikely that they will be as strong as in the first half.

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