World hot-rolled band export price may have peaked

WSD is maintaining the odds at 70% that world hot-rolled band export prices start to fall by the second quarter of 2005. Developments supporting the decline, should it occur, may include: a) continued only “fair to good” orders for steel sheet mills in the USA and Western Europe; b) the impact of surging global steel output in early 2005, after huge gains in November-December 2004; c) less positive seasonal forces for the mills’ new orders after March; d) increased hot-strip mill capacity, especially in China; and e) steel buyers’ reluctance to place orders because they fear a price collapse. WSD is not picking up at present any significant upward pricing momentum for hot-rolled band prices in either the United States or Western Europe; in both regions, prices remain lofty at about $630 per net ton and $650 per metric tonne, respectively. Historically, when prices are lofty but not rising, the next trend is often down.

Contrarily, developments working to sustain the steel shortage well into 2005 may include: a) a strong steel sheet market in China (cold-rolled coil is selling at $720 per tonne FOB the steel plant, which is a $210 per tonne premium to the price for hot-rolled band); b) strong steel markets in South America, the CIS and the Middle East; c) sharply rising Chinese steel demand reflecting booming fixed asset investment in that country; d) relatively strong slab prices on the world export market (down perhaps $10 per tonne in the past two weeks); e) integrated steel mills’ determination to not relinquish the high prices given the unbelievable rise in their raw material costs this year and expected iron ore contract price increases for 2005; and f) constrained global steel production (apparently unlikely in view of December’s widespread production surge).

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