This is the second of a three part series on steel pricing trends. You can read Part One here.
The steel coverage is a follow-on piece to our previous base metals quarterly pricing update post from last week. You may also read that post here.
Interestingly we are seeing the first signs of pressure easing in the North American market. The mills have dropped a proposed increase in surcharges and base prices for September on HR/CR steel gauge coil. They have more capacity to offer and orders have been completed earlier in the months of July and August contrary to the position in the first half of the year. Certain products are still tight like distinct plate but that is as much due to the closure of mills like SSAB’s IPSCO mill for maintenance this quarter. The LME Billet contract has fallen by 25% since the spring. Massive infrastructure investment is still going on in Russia, China, Brazil and parts of the Middle East like the Gulf and Saudi arguing that demand will continue to increase and prices will be supported by the high raw material costs of iron ore, coking coal and scrap. But with the large margins most of them are enjoying, it is entirely plausible we will see an easing in prices towards the end of this year as mills seek to maintain capacity utilization. Our expectation is that the US economy will emerge stronger in 2009 than it has been in 2008, that demand will begin to pick up during the year but that a gradual and modest strengthening of the dollar will encourage more imports and reduce exports. The result will be an increase in supply and an end to monthly price increases. Will we see the price dropping back to 2007 levels? No, raw material costs and a still comparatively strong world market will support prices but we would not be surprised to see a gradual easing of prices in the region of 5% between now and early 2009.
–Stuart Burns and Lisa Reisman