Commodities | Oct 05 2006
By Chris Shaw
Weaker pricing in flat products in both Canada and China since July meant the global steel price in September was slightly below the level at which steel industry consultant MEPS had forecast it would be when it made its quarterly predictions in July.
While this has led the group to revise down its September price forecast accordingly, it expects prices globally to remain relatively steady through to the end of the year, though it continues to forecast further falls over the next 12 months.
The European Union steel market has been a good performer in recent months, MEPS noting prices there met its July forecasts. It sees potential for further increases in October as the market is still strong and this is leading to some material shortfalls. Looking further out, MEPS anticipates prices peaking in October/November, with a slow decline likely to follow on the back of an expected weakening in scrap prices and lower demand.
The fall in prices in Canada over the past couple of months meant North American prices generally were about 3% below the group’s forecast, reflecting cuts to scrap surcharges and weaker sentiment. As a result MEPS is now looking for a US$200 per tonne fall in prices by January, followed by a steeper decline into the middle of next year. This reflects both the likelihood of demand from both the housing and auto sectors being weaker than expected, as well as the impact of additional cheap imports from Asia.
Part of the increase in imports from Asia is likely to be the result of weaker sentiment in the Chinese flat product market, which MEPS suggests was largely responsible for prices in the region for September coming in 1.5% lower than it had forecast in July. While it sees potential for the next six months to be somewhat below its previous expectations, MEPS remains positive longer-term as it notes activity levels in Japan remain “fair” and there is solid demand in Taiwan.