The leading indicator cited by the trade as evidence that a global price peak may have been reached, is the US hot rolled coil price. Across the board, imported HRC prices have dropped by $30 per tonne in recent weeks.

Many view price trends in the US as the first sign of price trends elsewhere, though the Asian crisis of 1997, in which far East prices collapsed first, was an exception to the rule.

The argument put forward in some trading circles is that we now live in a steel market of faster cycles. US and European prices started recovering after the Asian crisis at the back end of 1998. Now, after 18 months of rising prices, no matter that they have not yet risen to levels of the last peak, it is to be expected that prices should now show signs of weakening.Essar Group director, Prashant Ruia, agrees with this assessment on prices.

Ruia says that the steel industry has witnessed six consecutive quarters of buoyant growth and improving prices and believes that a correction in prices is healthy. Ruia is of the opinion that traditionally steel prices tend to move up after the US summer vacations and he expects HR coil prices to recover from August.

According, to Jindal Vijaynagar Steel's senior vice president, S W Wagh, prices in North America have come down because of excess supply from third world countries over and above what is manufactured by the US steel mills. Wagh believes that some traders have done speculative activities in the wake of buoyant demand and rising prices and now found that materials were lying unsold at the ports.

In will be interesting to see how successful the Europeans are in raising their domestic prices next month. Analysts and observers state that, even in the strongest of markets, the third quarter is a tough time to try to raise prices because it covers the northern hemisphere holiday season. Some have interpreted the mills' moves as an attempt at least to ensure no price slide begins early in the second half. Even if the third quarter price rise attempt is unsuccessful, the market can expect price rise announcements for the fourth quarter as the mills try to prolong the market peak until the end of the year.

European producers will, however, argue differently pointing to continued high levels of demand. But according to steel mills, large orderbooks and long lead times do not by themselves constitute a definition of good demand. What matters are real consumption levels and, to arrive at a true picture of real consumption, stock levels have to be carefully studied.

This point was a central theme at last month's Eurometal Congress in Madrid. Eurometal, which groups Europe's independent and mill-owned steel and metal stockholders and service centres. Eurometal's aim has been to find some means to alleviate the grossest market distortions caused by over-stocking and sudden influxes of imports. Its president, Josef Von Riederer, is from Thyssen Krupp Materials & Services, a sister company of Thyssen Krupp Steel, but which is run independently from the mill.

The need to narrow the gaps between the peaks and troughs of steel pricing is as important for Eurometal members as it is for the producers, as Von Riederer pointed out in Madrid. He said that an average drop of 100 euros in steel prices means a loss to the stockholding and service centre business in Europe of euros 1.1 billion, given the average 11 million tonnes held in stock in Europe at any one time.

Eurometal believes that, while it is impossible to stop prices fluctuating altogether, the sensible study of accurate, complete and timely inventory figures, which Eurometal has started to try to collate, should provide sufficient early warning of when prices are turning the corner.

What von Riederer wants to avoid is the needless repetition of past pricing mistakes. In Germany, he explains, lead times are normally two months. If spot prices rise by say, 50 deutsche marks (DM) per tonne, three weeks later the steel mills will announce a DM50 price rise. But by then lead times will have stretched to four months and end-users can no longer book directly with the mills, he says. They therefore have to turn to stockists, whose turnover increases although this turnover is artificial.

The stockist in turn has to buy more and in any case buys more in anticipation of the higher prices such that mills' lead times grow even longer. So the stockist turns to imports and consequently imports begin to rise.

The steel mills' orderbooks then fall as orders, which were booked under artificial conditions, turn sour. Lead times shrink suddenly to a few weeks as nobody's buying anymore. Prices begin to fall. At this point the imports arrive and distributors, producers and consumers alike are in real trouble, explains Von Riederer.

This candid explanation of a typical market cycle and the producers' and distributors' roles in it, might lead some to shrug their shoulders. After all no-one can stop steel being a cyclical commodity, nor can anyone deter producers and traders in a free market from trying to get the best out of it. But Von Riederer and his Eurometal colleagues seem to be confident that the steel market is sufficiently easy to read, given good statistics that traditional behaviour can be encouraged to change. Von Riederer doesn't expect price fluctuations to stop despite improving statistical service and exchange of information.

He believes that prices will remain more stable if there is more common sense in the market, which he says, is achieveable if everybody understands whats happening in the market, the mathematics of it.