Thunderstorm Alert

Steel mill’s pricing umbrella may not be sturdy enough to keep them dry.

World export prices about to fall

WSD remains profoundly negative on the outlook for steel export prices in the second half of 2008.  It’s only a matter of time, we think, before a “perfect storm” – which includes rising steel production, declining apparent steel demand and a “chill” in the marketplace – will drive down world steel export prices.  On balance, WSD is boosting the odds to 90% from 85% that world steel export prices decline in the second half of 2008. (Note:  Notwithstanding our forecast, we hasten to point out that the world hot-rolled band (HRB) export price, FOB the port of export, is currently steady at its 2008 high of about $1,100 per tonne.  In fact, we hear that thin-gauge HRB remains in especially tight supply on the world market.) 

What about the export price outlook for the first half of 2009?  WSD is less confident than before that there will be a sharp price recovery, assuming that there is a second half 2008 decline, because of the possibility of still-stagnant consumer durables demand in the Advanced Countries.  An improving economic outlook for Advanced Economies may not become evident until perhaps the summer of 2009.  We place the odds of a sharp steel export price recovery in the first half of 2009 at 30%, and in the second half at 65%.

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