A reverse summer lull

Hot-rolled band export prices have risen sharply since the beginning of August even though, seasonally speaking, this is often a time of year when they recede. What are the implications of this development?

• The upward steel price momentum is so substantial that steel shortage conditions – i.e., premium pricing – for hot-rolled band will probably not go away for the remainder of 2004.

• WSD believes, however, that world steel export prices for hot-rolled band in 2005 may be significantly lower – although not necessarily so low (50:50 odds) that the steel mills can’t turn in solid financial performances. By next spring, reflecting higher prices and increased availability of raw materials, global steel production may have risen to a level in excess of global steel demand.

• Profits in the period just ahead will be massive for steel and “steel goods” companies such as distributors, processors, tubers and other companies in which the steel content of their product is high (like barges, ships, and containers). Both groups are vulnerable to profit margin compression in 2005 in our opinion.

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