Steel prices rule flat on weak demand Physical market trade unchanged at $400/tonner

Print this page Posted on : 12-25-2008 by recycleinme.com

"We're probably going to see some price movement in late January when everyone comes back from holidays {ndash} there is still a lot of stock around in West Asia."

Reuters

London, Dec. 24

Steel prices on the London Metal Exchange (LME) held steady this week with few deals completed ahead of the holiday season due to weak demand which has forced many producers to cut back production.

Few deals

In the physical market, traders said mills offered Black Sea billet free-on-board (f.o.b.) at around $400 a tonne, unchanged from a couple of weeks ago, but few deals were done.

Prices are expected to remain sluggish until mid-January, with an estimated 750,000 to 1 million tonnes of billet and rebar inventories kept at West Asian ports and warehouses.

On the LME, the Mediterranean three-month billet contract was bid at $380/tonne from $370/tonne from two weeks ago. The contract touched its lowest since its February launch at around $255/tonne in late October.

Far-East contract

The Far-East contract was bid at $310/tonne from around $320. Billet is a semi-finished form of long steel, mainly used by the construction industry.

''Prices are still stagnant,'' a UK-based long steel trader said. ''Black Sea mills are trying to achieve prices around $380-400/tonne, but I don't think there are many deals done at those levels,'' he said.

''Some of the mills had some big orders, but they were done at lower levels,'' he said, adding that there was not sufficient demand to back up the offered price by the mills. Steel prices and demand have fallen sharply in the face of a global downturn, which forced producers to make harsh production cuts and to slash jobs.

LARGEST FALL

''We're probably going to see some price movement in late January when everyone comes back from holidays {ndash} there is still a lot of stock around in West Asia,'' a trader said.

Steelmakers, who enjoyed hefty profits and consecutive price rises in the first half of the year, now announce nothing but production cutbacks, redundancies and earning warnings.

World steel output was down 19 per cent in November against the same month a year earlier, figures from the World Steel Association show. For the first 11 months of the year, crude steel production was only up 0.9 per cent compared with 2007.

''If world production in December were to continue at the same rate as in November, October-December quarter output would finish down by 16.6 per cent year-on-year, which would be the largest fall in quarterly steel production since the mid-1970s,'' Macquire Bank said in a research note.

De-stocking signs

The bank said there were some signs of the de-stocking cycle in China coming to an end with reports of trader demand picking up and also some steel mills restarting production.

''However, the extent of the demand rebound remains unclear given the still weak economic fundamentals and the concern for the rest of the world is that a Chinese export recovery will cap a global steel price recovery,'' it said.

Source : Business Line