Thursday, February 07, 2008

Steel demand driving up prices

Heavy demand in emerging markets such as China has tightened steel supplies and pushed up prices for suppliers worldwide.

U.S. steel makers have the added benefit of favorable exchange rates, which have tamped down imports and stirred sales overseas.

"High shipping rates and the weak dollar are giving producers here a lot of leverage, particularly in the spot markets," said Bob Richard, senior research analyst at Longbow Research.

Hot-rolled coil sold at $670 a ton on Jan. 25, according to a recent report from Citigroup. (NYSE:C) That was up from $543 during last year's fourth quarter and well above the 2007 peak of $580.

Cold-rolled coil fetched $750 a ton on Jan. 25 vs. $640 in the fourth quarter and $680 for the 2007 peak. Gains were reported across most product categories.

Most analysts see prices remaining strong this year, even amid U.S. recession worries.

"While steel would normally be wrecked during a U.S. recession, the market is structurally short," Citigroup analyst John Hill wrote. "Many product categories have risen by 30% on a tight supply chain. Imports and service center inventories remain near two-year lows."

Meanwhile, steel factories are hard at work trying to fill orders.

Full story at CNN Money

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