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Better Times Ahead For Steel Producers

Commodities | Apr 03 2009

By Rudi Filapek-Vandyck

Things will get better, but manufacturers of long steel products will have to wait a little longer. This seems to be the message from industry researcher MEPS in its latest update. The researchers report the short term outlook contains virtually no prospects for a sizeable pick-up in prices for flat products, instead prices are expected to fall with customers still haunted by financial difficulties.

The result is for continued de-stocking which is expected to last at least a few more months and this will put a limit on mill sales. As prices are already close to the cost of production, further price falls should remain limited though. A view supported by the fact the US dollar seems to have come under pressure once more and the industry researchers explain this too should limit the extent of price declines across the globe.

MEPS singles out hot rolled plate with selling figures anticipated to weaken more than for other flat product categories due to “bloated inventories” on top of weakening consumption from energy and wind turbine markets.

There should be better news from mid-year onwards as government stimulus initiatives across the globe are expected starting having an impact, beginning with government initiatives to encourage car buying. This, predicts MEPS, will almost certainly start filtering through to higher vehicle production. This should increase sales of cold rolled and coated steel in the second half of calendar 2009. Costumers might even consider rebuilding some of their inventories.

MEPS sees a market landing back in balance by the fourth quarter this year. From that point onwards prices may start moving up again as well, and possibly more markedly than what is being described as a “modest price revival” from mid-year onwards. As overall confidence is expected to increase from early 2010 onwards, the industry researcher believes product prices are likely to follow suit.

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