Dow Jones reported that Merrill Lynch thinks Brazilian domestic flat steel prices are likely to fall 25% in 2009. According to Merrill Lynch, Brazilian flat steel prices have shrunk 10% so far this year.
Merrill Lynch said that Brazilian steel prices are currently 48% higher than imports owing to a strong fall in foreign prices and an appreciating Brazilian currency over the past five months.
The bank said that "We believe the difference is unjustifiable, given the weak internal demand scenario."
Traditionally, Brazilian steel commands a premium of 15% to 20% on imported products. A fall in Brazilian production costs, including iron ore, should also contribute to a fall in prices.
Merrill Lynch said that spot iron ore prices had fallen 20% to 25% since the price peaks of February 2009 and were now near the low points of October and November last year, at USD 60 a ton.
Merrill Lynch also forecast a 20% fall in iron ore prices in 2009, no change in 2010, and successive falls of 5% in both 2011 and 2012. Iron ore will eventually reach a long term price of USD 55 a ton in 2015.
Another bank, Morgan Stanley, said that it expected international iron ore prices to drop 35% in 2009.