Commodities | May 11 2006
By Chris Shaw (Tokyo)
Steel prices throughout Asia have improved in recent weeks, but in the view of industry consultants Steel Business Briefing a cautious approach is still warranted as the price increases are not being driven solely by project demand.
The group suggests part of the price gains can be attributed to re-stocking, which indicates demand may weaken in the September quarter.
It also advises caution as despite the fact China is now a net exporter of steel products, prices have continued to firm recently. Such an outcome cannot continue indefinitely though, the group pointing out as China continues to lift production it remains a possibility global markets will be impacted by excess supply and prices will come down. This would result in an outcome similar to last year, when the combination of excess production and lower demand drove down steel prices.
Japan has been among the first to feel the impact of China’s increased output, as traditionally China has been a major export market for the Japanese producers. Steel Business Briefing suggests the problem for the Japanese is the quality of Chinese steel production has improved, so cutting into the premium end of the market where the Japanese had dominated.
The group notes EU steel producers are also feeling the impact of China’s improving capacity, as they are also losing out on what had been a major export market.