Thursday, August 20, 2009

Dramatic fall in Chinese steel prices, where next on Global Prices? | Steel Strip

We spotted this report today at Reuters, quoting from the metal Bulletin.

After a months-long rally to a 10-month high last week, the

price of benchmark hot-rolled coil in China—which makes half

the world’s steel—plunged 7.6 percent to around 3,987.5 yuan

a tonne this week, data from Metal Bulletin showed.

That in turn has dragged iron ore prices off their peaks as

well, with Indian spot market exporters reporting virtually no

deals this week, adding further complexity to price


 Read full story at Reuters

As recently as three or four years ago, steel prices movements, particularly in the West were an orderly affair with annual or bi-annual negotiations between the large steelmakers and their major customers (usually automotive). The outcome of these negotiations would provide the basis for general market prices.

The opening world market and the increasing demand from China, India and other fast growing economies have changed that forever. European mills in particular used demand from China to force up market prices dramatically, then the availability of Chinese steel exports started to temper the ability of Western producers to force price increases on the market.

Then came the international banking and economic crisis and steel prices fell as demand evaporated.

The steel producers however appear to have “seized” upon a glimmer of recovery (0.30% growth, in one month, in a couple of European economies) to announce price increases. At a time when demand is extremely fragile a decision that seems to us somewhat irresponsible.

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