Dow Jones reported that steel billet in the Mediterranean region continued to rise due to sustained demand from the North African region and relatively low level of offers from steelmakers in the Commonwealth of Independent States.
Traders said that the price rise may dissipate if North African countries, particularly Egypt, stop buying the metal or producers restart production to take advantage of higher prices.
A Geneva based trader said that "There''s a lot of capacity on standby is starting to overheat in terms of demand. We could see prices moving up and down in dead cat bounces for a while."
A London based trader said that "There has been buying in Egypt and stocks in the Gulf states are lower but that there are signs that Egypt is now building up steel stocks rather than using steel to supply its construction industry. The construction season in Egypt could also come to an end when summer approaches.
Traders said that construction activity in the North African region and Middle East region typically slows down during the summer when temperatures are too hot to work.
Two traders said that a relative scarcity of offers from the Commonwealth of Independent States was buoying prices, although they provided different reasons for the scarcity.
The London based trader said that CIS steel producers were choosing not to put offers in the market at the moment in hopes of driving prices higher as the traditional construction season begins to kick in.
The Geneva based trader pinned the lack of offers on default concerns. He said that some CIS steel producers, particularly those that operate as holding companies, were refraining from increasing sales in case they opt to sell a steel plant in order to alleviate their financial burden.
He added that such holding companies would prefer to reduce steel sales in order to avoid defaulting on a contract if they sold a plant. Steel contracts are typically the liability of a holding company and not the individual plant, the trader added. He declined to name companies.
Nevertheless, both traders said that they expect to see more CIS offers and production come on line if billet prices rise to USD 400 per tonnes.
Billet from the Black Sea region, freight on board, was priced at about USD 350 per tonne to USD 370 tonne at the end of the week compared with USD 290 per tonne to USD 300 per tonne slightly over a month ago.