Steel billet futures rise on tight physical supply Rising input costs, strong demand may keep prices high

Print this page Posted on : 04-24-2008 by recycleinme.com

Steel billet futures traded on the London Metal Exchange rose last week on tight supply in physical markets, traders said. The Mediterreanean contract was quoted at $935/960 a tonne on Monday, after rising around $55 last week to close at $950 on Friday, while the Far East contract was quoted at $940/960 a tonne on Monday, having gained $45 to $950 last week.

Far-East quiet

''In the physical market, Far-East trading seemed quiet, although prices remain at high levels,'' LME broker Marex said in a research note.

''While in the Mediterranean region it emerged that Turkish rebar export offers have risen another $20-30 since last week and have been booked at levels approaching $1,050 f.o.b,'' it said.

The LME's steel futures opened for trading on the exchange's telephone market and electronic platform on February 28, since when volumes have been light.

LME data showed volume on both contracts was 450 lots by April 16.

"The volumes were slightly higher last week and we've continued to see interest from clients - physical merchants and stockholders,'' an LME trader said.

''I think the big thing's going to be when the price starts to come off in the summer and producers are looking for somewhere to put their metal. The natural choice is going to be the LME,'' the trader said. The contracts will begin open outcry trading on April 28, when they will become eligible for future delivery.

TIGHT MARKET

Analysts say massive rises in steel production costs, as well as strong demand, could keep prices high for the near future. "Coking coal prices have tripled and iron ore has risen significantly. The cost of producing has gone up,'' BNP Paribas analyst Mr David Thurtell said. Coking coal, one of the primary materials in steel, will cost global steel makers triple what it did last year, while the price of Brazilian iron ore rose 65 per cent in annual contract negotiations. Billet supplies from China have almost come to a halt as a recently imposed export tax has curbed exports, which in turn has boosted the price of scrap metal, a major raw material in billet production.

Tight market

''It is a reflection of a very tight market,'' Mr Thurtell said. Billets are semi-finished products mainly used in the construction industry. They account for almost half of the world's total crude steel production, which industry data calculates at around 1.3 billion tonnes annually.

Source : Business Line