Friday, October 10, 2008

Latest Steel prices forecast from MEPS

 North America

Transaction values for all flat products are forecast to decline again this month. Deteriorating economic conditions are likely to cause demand from many end-user segments to weaken further. The addition of the normal winter slowdown could result in extremely low mill order books by the end of the year. Consequently, local producers will, almost certainly, have to reduce offer prices in order to attract increased purchases from customers. However, domestic mills are likely to cut production in order to help buoy steel transaction values.

Steel price declines are forecast to continue into the beginning of next year. However, smaller decreases are predicted in the plate category as strong consumption in the rest of the world should limit import quantities into the domestic markets. A modest revival in transaction values is then predicted for the second quarter. Increases in raw material costs in 2009 are likely to encourage the domestic mills to implement price advances. However, we do not envisage another round of substantial hikes due to slower growth rates in steel consumption across the region.

Growing weakness in the non-residential building sector is predicted to result in lower than normal demand for long products during the fourth quarter. Distributors are not expected to build inventories in the run up to the end of the year. Consequently, sales over the next few months are forecast to be at low levels. This, coupled with a large decline in scrap values, will, almost certainly, force domestic mills to reduce steel selling figures for all long products, particularly for the reinforcement products. Production cuts by some US producers may limit the falls, but are unlikely to prevent the downward trend. Smaller decreases are envisaged for medium sections and beams due to tighter supply in the market.

Deteriorating economic conditions could delay a rebound in steel prices but a modest recovery is anticipated for the first half of next year. A small increase in raw material costs is expected during 2009. Consequently, mills will, almost certainly, attempt to push through steel price advances.

EU Stainless

Stainless selling figures are forecast to decrease further in October. Declining nickel costs, together with large drops in scrap values will, almost certainly, push alloy surcharges for austenitic grades lower. Basis numbers are also expected to sustain negative pressure in the short term. Consequently, transaction prices are likely to continue on their downward path through the fourth quarter. This is not good news for distributors and stockists as this would cause the value of their inventory to reduce. Therefore, distributors are expected to limit purchases, especially with year end financial reports drawing near.

As predicted, the monthly average nickel price declined during August and continued to slide significantly in September. A sizeable decrease in austenitic alloy surcharges is, therefore, anticipated for October and November - exacerbated by large falls in scrap costs. Nickel inventory levels held in LME warehouses soared to a nine year high as consumption from the stainless steel industry dropped considerably over the summer break. Nickel values are forecast to decline further in the short term as demand remains low. Deteriorating economic conditions could cause an even sharper correction. A seasonal upturn in consumption is expected during the first quarter of next year. This is likely to result in a modest revival in nickel prices. However, we believe cash figures will remain below $US20000 per tonne over the forecast period due to a lack of confidence in the market.

Stainless transaction prices are predicted to stabilise by early next year, with values for type 304 cold rolled coil slipping below €2300 per tonne and grade 316 prices. Credit restrictions should ease early in 2009. Customers will then be re-assessing their stock levels. However, recent nickel price falls, coupled with economic uncertainty, may cause both distributors and end-users to remain cautious. Consequently, a large inventory build is unlikely to occur. However, a potential upturn in consumption is forecast to lead to a modest revival in transaction figures during the second quarter of 2009.

MEPS (INTERNATIONAL) LTD. is a leading independent supplier of steel market information. Our regular monitoring of steel markets provides us with a unique insight of consumption and production trends worldwide.

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