Now the year is drawing to a close, it is tempting to forecast the movement of prices for early 2012. Flat prices led by HR coils and plates are down due to poor demand from consumer goods, automobile and tube segments as well as less urge to build up inventory. HRC of Ukranian origin at $610 cfr Mumbai is matched by supplies from Iran at $10/tonne lower.

But the rising scrap prices by about $20/tonne for Heavy MeltingScrap 1&2 (80:20) of United States origin at $460 cfr Turkeyhas made the price of Billets and Merchant Bar equivalently dearer at $700-710 fob Turkey.

As demand for long products mostly from the construction sector remains subdued but stable, the prices are relatively higher than those of the flats.

Early next year, therefore, may exhibit a higher capacity utilisation in billet rolling and other long products. One notable exception to this scenario is the higher HR prices ruling in United States to the extent of nearly $200/tonne compared to the ruling global prices.

This may be a temporary phenomenon as higher prices would attract exporters to United States. However, India and CIS countries may not be able to reap higher realisation due to high anti-dumping and countervailing duties imposed on them. The higher prices have already set in motion the kick-off of several HR mills (Arcelor Mittal, Nucor, Severstal) in United States.

The scenario as it unfolds itself more clearly in the early months of 2012 would imply that raw material prices would exhibit a falling trend. Coking coal from a high of $335/tonne fob Australia in Q2 of 2011 has been settled at $235/tonne for Q1 of 2012, a drop of 30% and iron ore from $185/tonne cfr China in Q1 of 2011 is likely to come down by 30% at $130/tonne in Q1 of 2012, if not more.

Long product producers may thus enjoy a period of higher capacity utilisation and also higher margin compared to flat producers. In India Q4 (Jan-March) is traditionally associated with higher government expenditure in project constructions which should help marketability of TMT and structurals.

Under Indian context, it would lead to higher availability from EAF/IF units. In 1990s the first major thrusts of private sectors in steel ( Jindals, Essar, Ispat) were oriented towards flat products.

Over the years these producers have acquired and created fresh capacities in long products as well and are equipped partially to minimise the risks of operating a single product line. Flat products require value addition on a continuous scale in order to keep abreast with market dynamics, an imperative need not so pronounced for the long products. The coming days may provide more such interesting developments for the steel producers and may usher in new strategies.

The author is DG, Institute of Steel Growth and Development. The views expressed are personal