Hot-rolled band spot pricing remains under pressure

WSD’s feedback indicates that hot-rolled band and related steel sheet prices remain under pressure in a number of spot markets. However, an important new positive for the steel mills is March 2005 data showing a sizable decline in steel production outside of China since late last year. Nevertheless, we are not yet sensing any initial upturn in the mills’ new orders in most regions (including the USA, Western Europe and China).

WSD senses that hot-rolled band (HRB) prices may bottom in the third quarter. A recovery in the fourth quarter, which could set the stage for sizable price increases in 2006, might be a reflection of: a) a continued rise in steel demand outside of China in 2005; b) another sizable gain in Chinese steel demand in 2005 (as fixed asset investment in the country climbs another 20% or more); c) stagnant steel production both inside and outside of China versus current levels; and d) users having pared inventory to lower levels.

Not infrequently, when steel prices turn up after a decline, there is a “triggering event” that causes a change in steel buyers’ attitudes. At that point in time, steel buyers may decide to no longer pare inventories; in fact, they may seek to add to them. In other words, buyers will start to panic once they anticipate that the new price trend is up. What “triggering” events might change steel buyers’ inventory intentions to the positive side (from the mills’ perspective) in the second half of 2005?

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