Friday, November 03, 2006

MEPS Carbon steel price forecasts

The MEPS - World Average Flat Products Price should hold up in November but start to decline steadily over the next six months. We expect the figure to bottom out at a level 6.5 percent below the current value. Significant decreases in the EU and North America should be offset, to a certain extent, by more stable pricing in Asia. The stability in the latter region is partially the result of increasing exports to all parts of the globe but particularly EU and North America.

Global supply is currently above real demand. This is the background for our forecast of a fall in world prices over the period to July 2007. During the early part of the second half of next year we expect the supply/demand balance to have been partially restored through output curbs. Steel transaction price stability should then be able to be maintained.

The MEPS - World Average Long Products Price declined by around 3 percent in October and significant transaction price decreases are predicted in North America and the EU over the next six months - mainly for seasonal reasons but also the result of increasing import volumes. Asian values should stay firm over the period to mid 2007 due to reasonable demand and higher exports. An upturn is envisaged during the second half of next year when regional import and export activity returns to a more regular pattern and the existing imbalances are rectified.



Meps are suggesting a fall in current prices which is likely to be checked by cuts in production. We have already seen an indication of this as recently reported. Mittal Arcelor have started to reduce production.

Long term as more and more Chinese and Asian steel in general it will be increasingly difficult to control steel prices by restricting supplies unless we see much more rationalisation and mergers.

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