Global steel market continues to remain under a cloud of uncertainty. There are divergent trends across the markets. Domestic prices in major consuming countries have been significantly different from each other and more specifically from the global export market. Production cuts have been abundant, evident from the crude steel production estimates released by the World Steel Association.
However, we have reasons to believe that the worst for the global economy is perhaps over by now.
As far as steel production is concerned, the March figures indicate a rising trend from the worst that had happened in December 2008. But, even at the current monthly production rates, considering seasonality, the global crude steel production is not likely to go far beyond 1150 million tonnes, a number way below the 1330 million tonnes reached in 2008.
What one is happy about is not just with the fact that the current scenario is far better than the one forecast in early January, when the figure was not expected to even touch the 1000 million tonne mark,but, the experience of many that the overall scenario in terms of demand is good enough to support a higher level of production than what has been forecast currently on annualised basis.
This is reflected also in steel prices. The long products prices especially have seen some significant improvement in the past couple of weeks. Even in the worst affected economy, the USA, rebar prices have started climbing up. The Indian mills have recently raised their price tags too. Even the prices of flat products such as CR sheets and plates have increased to some extent on the world export prices and, importantly, against general expectation. The situation in respect of HR coils, however, remains unchanged. Although there was no fall registered in the past two weeks, continuous improvement in the prices of these products in China has raised hopes for the global industry.
The market sentiments have been reflected also in the rising prices of steel scrap and to some extent iron ore on the spot deals.
The coking coal contracts are nearly over with most major steel makers. The steel makers had the upper hand and there were good deals to carry home. The iron ore price negotiations are on ?officially?. There seems to be no hurry shown by the steel makers to conclude the talks on the terms sought by the mining industry.
They are happy with the spot business. Since the current level of uncertainty is fairly large for steel prices despite the improvement seen, and also considering the fact that the iron ore industry is sitting with huge mining capacity, it is in their interest today to see that no deal is signed at the moment. The miners are being forced to cut production. They have to do it to save the price. But, there are reasons to remain worried about the steel industry?s prospects in the immediate future. Steel prices may fall once again from the middle of this year.
China may be forced to export steel in a big way. They have excess production capacity and currently very low iron ore and coal prices have given them significant competitive strength. They have also apparently built up a good stock of iron ore bought at very low prices. Interestingly, they have taken advantage of low price of coking coal from Australia and imported substantial quantities recently. Global steel prices will depend a lot on how the Chinese build their global business strategy.