Steel Market Forecast Briefing - September 1 2009

Pricing to break out of trading range
The inventory analysis that we have undertaken in North America and Europe this month makes us more bullish on the ability of prices in these two economies to accelerate sharply through to the end of the year and into at least Q1. This will take prices out of their trading range that we have identified for much of the past year ($350-500/tonne fob CIS for HR coil and $50/tonne higher in mature markets). The sustainability after that depends on whether we emerge stronger out of the downturn and continue to accelerate, or whether there is further weakness once the subsidies end – a view to which we are generally tending toward.

For China, news that the government is beginning to tighten liquidity is bearish for steel in the medium term. With a high proportion of demand related to fixed asset investment, the huge relative stimulus (more than 12% of GDP) has given a massive boost to steel, while its consequent withdrawal will be equally concerning. With our view that the Western consumer is unlikely to return to pre-2008 days as early as 2010, Chinese manufactured exports are unlikely to be able to pick up the slack. Consequently, we fear steel demand could begin to decline once the stimulus is withdrawn over the next 6-12 months.

> This article gives the introduction to our latest detailed analysis on the market. To access a full version of a recent detailed monthly report on the steel flat product markets plus recent Briefing Updates, click on the links below:

> Steel Market Forecast Briefing - November, 2008.

> Steel Market Forecast Update - November 24, 2008.

> Steel Market Forecast Update - November 14, 2008.

Disclaimer: Whilst every effort has been made to ensure the accuracy of the information used in this document, GFMS Metals Consulting cannot guarantee such accuracy and GFMS Metals Consulting does not accept responsibility for any losses or damages arising directly, or indirectly, from the use of this information.