The MEPS - Global all products price declined in July faster than we anticipated - mainly as a result of decreases in the EU and North American flat products categories. We forecast reasonably stable pricing over the period into early 2008. Predicted increases in the North American market are likely to be offset by reductions in the EU. A significant pick up is foreseen later this year in the North American flat products sector after the current destocking phase. Prices in this region are unlikely to attract imports to slow the escalation in the medium term. Both flat and long product prices in the EU are forecast to retreat over the next six months from their dizzy heights in 2007. Imports are likely to be an ever present threat. Oversupply in China should keep the lid on prices in Asia through 2007 and into the following year.
EU - ALL PRODUCTS COMPOSITE CARBON STEEL PRICE
The MEPS - EU all product price fell, once again, in July. The decline was 2.8 percent and was faster than we anticipated in our deliberations in June. This was due to a substantial reduction in selling values of bar and rod as demand fell ahead of the seasonal slowdown in construction. Scrap costs have also been steadily falling.
We expect reasonably stable pricing conditions in both the flat and long products segments over the next few months. However, in the period to early 2008, a modest price reduction is envisaged. Winter weather will, almost certainly, reduce activity in the building/construction segment - pushing selling values in the long products categories downwards. High inventories are likely to lead to weakening prices in the strip mill sector in the same time horizon. An upturn is forecast in the second trimester as supply and demand move nearer into equilibrium.
NORTH AMERICA - ALL PRODUCTS COMPOSITE CARBON STEEL PRICE
High inventories and weak auto demand contributed to a further reduction in strip mill prices in July. This was the main contributing factor in the 2 percent reduction in the MEPS - all product carbon steel price. Continued weakness in the strip mill sector will, almost certainly, push the all products price lower over the next few months.
Overall price improvements are forecast for the final quarter of this year and well into 2008. Oversupply in the flat product segment should give way to a more balanced supply/demand situation. After a seasonal downturn during the last trimester in the long products category, we forecast a pick up in activity and pricing through the first half of 2008.
ASIA - ALL PRODUCTS COMPOSITE CARBON STEEL PRICE
A modest decline in the MEPS - all products Asian price occurred in July. This was entirely due to significant decreases in selling values in the strip mill sector in China. Stable conditions prevailed in the flat products categories in the other three countries and in the long products sector.
We continue to forecast reasonably steady market conditions across the region for the remainder of the year. A modest upturn is then envisaged in 2008 - partly fuelled by higher input costs and a slight recovery in consumption.
The main threat to this prediction will come from any further substantial increases in supply to the Chinese market from new capacity installations coming on stream over the review period. New export taxes on cold rolled coated products could also upset the delicate supply/demand balance.
15.08.2007
Source: MEPS - STEEL PRICES ON-LINE (regional steel price tables & forecasts)
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