Looking For A Steel Price Reversal

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By Greg Peel

Merrill Lynch notes Chinese steel exports fell from their June highs of 2.8mt to 2.1mt in July and the analysts believe more falls are on the cards. This is a result of May credit tightening starting to have its effect, and the seasonal nature of the Chinese economy where most of the growth is in the second half.

The analysts believe Chinese steel traders are even financing through margins to take advantage of a bounce. Hot-rolled coil is set to bottom out soon on improved sentiment. Long products will take longer.

A strong European market has eased as Chinese exports have flooded in but that should reverse as Chinese exports slow down.

Levels of Chinese production will always be a concern, but Merrills is looking for an ease in the recent bearishness in the steel market.

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