All MEPS flat products forecasts have been revised upwards as a result of the staggering 200 percent price rise in coking coal contracts. Scrap figures also rocketed during April. Growing imports for most products will not be sufficient to relieve the tight supply situation in the market in the short term. Consequently, transaction values are expected to climb until the middle of the year. However, ordering is likely to be kept to a minimum as credit constraints restrict the volume of material customers are able to purchase. Buyers are also currently unwilling to speculate at such high prices. This could limit the size of the increases achieved by the mills over the coming months. The MEPS – Hot Rolled Coil transaction price is, therefore, predicted to reach $US975 per tonne by the end of the second quarter.
Lower levels of buying activity over the Summer holiday period are likely to bring price rises to a halt. The economic outlook for the second half of 2008 is uncertain, with the threat of a US led recession remaining high. This is predicted to lead to a drop in steel consumption. Fewer new projects, as a result of the credit crunch, are also expected to reduce order intake on the mills as the year progresses. Consequently, transaction values are forecast to fall in the fourth quarter. Due to strong demand from plate consuming sectors, prices for this product should decline less than for other categories. Most selling figures should recover by a small amount in the New Year as distributors look to re-fill depleted inventories.
Due to recent hikes in scrap costs, MEPS – average transaction values for all the long product categories are expected to increase further over the next few months. However, poor demand from both end-users and distributors, who are reluctant to build stock, should limit these rises somewhat. As such, prices should stabilise by the end of the second quarter. Transaction values are then predicted to be between $US237 and $US293 per tonne above the lows recorded in December 2007.
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