Thursday, January 22, 2009

Steel prices

I came across this article by Humeyra Pamukat at Reuters.

Steel prices: Ready to recover ?


The worst could be over for depressed steel prices with slow improvement on the cards in Europe as evidence grows that destocking in the $800 billion industry is close to an end.

But analysts dare not talk about a sustainable recovery in underlying steel demand as such and a come-back is not expected before the end of the year, if not 2010.

"We're not looking at further steep falls (in the price) nor on the other hand are we looking at a rapid recovery," John Lichtenstein, global head of steel at consultants Accenture.

Steel demand and prices have tumbled across the globe after the global credit crisis paralyzed consumers' purchasing power and also forced producers to cut production sharply to match weakening demand.

It was that swift supply response by steelmakers, which has removed millions of tonnes of capacity from the market. Coupled with stockholders having almost depleted their inventories in the last six months, prices are likely to find a floor.

"There has been a considerable destocking of the entire supply chain and it is coming to an end," Lichtenstein said.

"Any picking up in end-user activity will flow through to the mills and increase orders and as intermediaries gain some confidence that the uptake is underway they'll begin a modest restocking," he said........

 Read the full article

It is well worth reading the full article, to get a feel for the Global picture. Some steel buyers reading this however may be confused, as many of us have not seen prices falling. It depends largely on what you are buying as to whether or not you have seen price reductions. Spot prices on commercial grades have fallen as producers and stockholders de-stock and turn material in to much needed cash. However contractual prices going forward have not benefited from price reductions as the steel producers (certainly in Europe), have made drastic production cuts not only to reflect falling demand but to protect prices from collapsing.

The real test will come as stockholders and big end users exhaust current stocks and need to place orders going forward.

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