Mar 2 2009
With the economic crisis deepening, we forecast a further steel price reduction for the flat products sector in the short term. Customers are expected to continue de-stocking as demand during the first half of 2009 is likely to remain low. This could be exacerbated by potential problems with bank borrowings, delayed payments and expected bankruptcies, especially among auto related clients. However, output cuts should help to stabilise transaction values during the second quarter of 2009.
We now believe that a revival in transaction values for all flat products will be delayed until the second half of 2009. Government stimulus packages may take several months before they generate an increase in steel demand. Large reductions in the steelmakers' 2009 raw material contracts could also lead to declining product prices during the second quarter. A return to a more regular forward ordering pattern is anticipated by the third trimester. This should help to push steel prices higher. However, sales volumes are still forecast to remain below recent averages levels as companies struggle to recover from the effects of financial restrictions.
As a result of the extended poor economic situations, the MEPS Long Products average price is now expected to decline further over the next few months. Weakening scrap costs, coupled with poor demand from the construction sector, are likely to reverse the previously anticipated upturn in selling figures. However, transaction values should begin to stabilise during the second quarter of 2009 as production curbs bring the supply-demand balance more into equilibrium.
Prices for all long products are forecast to climb in the second half of 2009. However, end user consumption is likely to remain depressed throughout 2009. Consequently, transaction values may not move to figures considerably above current levels before 2010.
Source: MEPS