According to South East Asia Iron & Steel Institute, steel prices continue to decline without any sign of picking up since the middle of 2008. Global demand continues to be sluggish.
It seems like production cutbacks by many steel makers do not have a significant impact on the price movement yet, and further cutbacks may be required.
The situation is still unclear. Reduction on raw material prices may improve producers" profitability to some extent. However, it may also lead buyers to believe that prices will continue to fall further. Raw material prices, particularly for scrap and spot iron ore, remained in downward trend through the first quarter of 2009.
According to Australian miner, Territory Resources Limited, benchmark contract iron ore prices are set to fall 30% to 35% from levels set last year, a reflection of lower demand amid the global recession.
World Steel Association reported that scrap price picked up from USD 125 per tonne in November 2008 to USD 268 in February 2009 and dropped dramatically in March 2009 to USD 230 per tonne. Meanwhile, semi finished steel prices continued to decline from USD 628 per tonne for billet in November 2008 to USD 350 per tonne in March 2009 and from USD 908 per tonne in November 2008 to USD 345 per tonne in March 2009 for slab.
Scrap based EAF producers are using up supply inventory and are still able to enjoy profit from the gap between scrap price and finished steel prices. However, re rolling mills may have a hard time since the price gap situation does not apply in the case of finished steel and semi finished steel.
SEAISI said that concrete reinforcing bar price declined steeply from the peak of USD 1,115 per tonne in August 2008 to USD 450 per tonne in March 2009. In December 2008, billet price was higher by about USD 200 per tonne, when compared to price of concrete reinforcing bar and wire rod. Similarly, slab price was higher than hot rolled wide coil by USD 113 per tonne in early November 2008 and by USD 200 per tonne in December of the same year.
In addition, the American slogan of "Buy America" raises more worries for steel makers in other regions. China, the world"s top steel producer and consumer, is also protecting its domestic market and encouraging exports to help local steel producers. Despite the earlier production cutbacks announced by many steelmakers in China, the China Iron and Steel Association came out to warn that steelmakers were rushing back to full production after a brief upturn in steel prices in January and early February, which means the market might be flooded by unwanted steel.
On the other hand, Russia and Ukraine are trying to export steel products to Asian markets at competitive prices. Recently in March, it was reported that Russia offered slab to Asia at USD 300 per tonne FOB as compared to the average slab price FOB reported by World Steel Association of USD 345 per tonne.