Steel prices: the snake is back?

Font Size

Print

Feedback

Email

Discuss

Related Articles

Posco project may kick start by JanArcelorMittal eyes new sites for steel plantsTata Steel sales up 25% in Aug

: It is a big relief for the steel industry globally to see a rather unexpected rise in steel prices. Most had believed earlier that more optimistic scenarios would not incorporate anything beyond a status quo in prices. Today, one has seen just not that, but, a rise over 50% from the lows of the recent times.

The good news is that global production numbers for May are higher from the previous month by about 6 million tonne. There has been improvement month-on-month indicating clearly that the worst has been left behind.

However, the May output of 95.6 million tonne of crude steel are still 21% lower, year-on-year. Therefore, it is not difficult to understand that the current prices are being held at fairly low levels of supply. The price hike is being driven by lack of sufficient steel on offer in the world market. China's involvement in the export market has been minimal. Users, seeing hopes of an economic recovery and being backed by easier finance, are able to raise inventories. Steel consumers are seeing the end of opportunities of procuring steel in their own terms.

Traders and stockists are showing willingness to buy and hold stock to make a few bucks in the days ahead. Iron ore prices in major contracts did not fall as much as one had expected earlier.

In fact, with higher ocean freight, iron ore, scrap and coal are turning out to be more expensive than one had expected. With this, the fear of low-cost steel creating a low price syndrome in the market seems to have gone. Confidence is back in a limited way in the world of steel.

The pure panic of falling prices and the fearful sight of inventories are no longer driving the sentiments of steelmakers.

But, all is not so well. The price rise has been more prominent for HR and CR coils and sheets. Long products price rise has been driven more by higher ocean freight costs of scrap than by an upturn in demand. Prices of plates continue to remain weak.

The current conditions of the steel market have been shaped by the factors on the demand side of the market. The sudden drop in demand brought prices down to the rock bottom and the marginal improvement in demand is helping prices up. However, steel pricing conditions in the relatively longer term are determined by the supply side of the market.