In November, the world All Products price fell back slightly more than anticipated. MEPS says the decrease can be attributed to significant reductions in Asian values due to oversupply. EU values fell as a result of poor demand in the long products segment and weaker long product figures. North American flat product prices were stronger as the result of higher scrap costs. MEPS says that concerns about global oversupply — mainly as a result of new capacity installations in China — have prompted the group to downgrade its forecast through 2006 by 2%. This assumes regulation of output to a level near to real demand. If this does not occur, further downgrades may be necessary in future.

MEPS says the November figure for EU All Products Composite was below expectations, due primarily to a decrease in the long products segment from weaker demand and lower scrap costs working through into prices. The group does not anticipate any major decreases into the second quarter of 2006, as flat product values are expected to hold up as a result of output curbs. Modest rises are still anticipated as the year progresses. These fairly optimistic forecasts could, however, be undermined by higher import volumes from Asia. MEPS says the Euro’s weakness against the US dollar should keep imports to manageable levels.

The average Asia All Products Composite figure fell by 3.5% in November, more than the group had anticipated. MEPS says this was the result of substantial oversupply in the region for most product classifications. The group has downgraded its forecasts for the next twelve months by approximately 4% because there is little to indicate the situation could improve unless significant controls on output are put in place beyond those already undertaken. The build up of capacity installations in China will make this task extremely difficult.

In the short term, MEPS says that the group’s previous price forecast for North America All Products Composite is likely to be exceeded. The increase will be due to higher scrap costs working through into steel mill selling prices as well as the completion of inventory drawdown for many product categories. However, the group believes that in the next few months, all product prices will come under negative pressure from Asian imports as the mills take advantage of the high North American prices. This export surge could push the all product price in the second half of next year to a level below our earlier predictions.

Source: MEPS Steel Prices On-Line