September 07, 2008

Prices of long products to reach new peak by May - GFMS

Global consultancy firm GFMS recently said that the global prices of long steel products are likely to rise sharply in 2008 and peak at a new record by May.

GFMS in a steel market report said that long product prices, which had increased by 44% over the last twelve months, could climb by a further 10% to a fresh peak, but prices were expected to soften later in the year, as the current panic buying might lead to higher inventories and would probably draw out more supply from high cost areas.

GFMS said that “We believe that prices will come off highs, but will remain well above 2007’s averages as higher material pricing, combined with strong demand in emerging markets and limited additional supply will keep the market tight and vulnerable to price spikes.” It added that on average, 2008’s prices would be some 40% above the average prices of last year.

GFMS explained that emerging markets were driving the higher prices, as demand in mature economies was weak. Prices in Europe and North America were lower than in the Commonwealth of Independent States, the Middle East, Latin America and North Africa.

It said that “Europe is currently a net exporter of long products, while the US imports of long products are at their lowest for many years. But Russia and Ukraine, as well as other smaller suppliers such as Brazil, Egypt and North African countries were reducing export supplies thanks to higher domestic demand.”

While China also reduced export volumes owing to higher tariffs, GFMS said that it believes that the current high prices would lead to an increase in exports from that country as it currently had spare capacity. However, countries in the Gulf and other emerging economies would continue to draw in long products.