Thursday, August 02, 2007

Higher Steel Prices Expected As Inventories Start to Drop

In contrast to a report from MEPS, the Wall Street Journal, is reporting possible steel price rises.



After a softer-than-expected first half, some steelmakers are predicting a more robust, and profitable, second half of higher prices and lower inventories.

Mittal Steel Co. and Arcelor SA, which are combining to form the world's biggest steelmaker by sales, said they could raise steel prices before the end of the year as they take some production off line. Last week, U.S. Steel also said it expected stronger sales and higher prices through the end of the year.

Mittal Chief Executive Lakshmi Mittal said he expects exports from China to the rest of the world to slow, and for demand in Europe and the U.S. to pick up in the rest of this year. Steel prices have eased somewhat in recent months, though they are still higher than earlier in the decade as a result of surging global demand and steelmaker consolidation. Spot prices for cold-rolled steel in June averaged $602.24 a short ton, down from $672.95 a year earlier, according to Dow Jones Indexes.

In an effort to lessen the widening trade gap between China and other steelmaking countries, China in essence has agreed to increase the export tax it places on certain types of steel. The rest of the world's steelmakers would benefit if they aren't competing against low-cost steel exported from China, the No. 1 producer.

In Europe and the U.S., steelmakers have seen prices decline somewhat as overstocked steel service centers have quit buying as much from the mills, choosing instead to whittle down their inventories. In Europe, some steel service centers -- which act as middlemen between steel mills and the ultimate customer -- have enough steel on hand to last more than 90 days. Generally, the centers feel more comfortable with a 30-to-45-day supply.

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