Feb 11 2009
Asian average flat products transaction values are expected to show only modest increases during February. The slowdown in sales activity around the Lunar New Year is likely to limit any potential price rises in the short term. However, demand may begin to return once the holidays are over. This, coupled with continued output cuts by some mills in the region, could help to revive selling figures by the second quarter.
Steel consumption is likely to remain subdued in most Asian countries throughout the year. The problems in the automotive sector are expected to continue. Raw material costs are predicted to decrease for 2009 contracts. This is likely to limit the potential for significant upward movement in steel prices and could result in downward pressure being applied in the second half. However, we do not expect transaction values to fall back to current levels in the short term.
In the long products category, a lull in sales over the Chinese New Year is expected to result in little price movement in February. However, the outlook for the first half of 2009 is positive. Demand from civil engineering in South Korea is forecast to grow by 10 percent this year due to government economic measures but this could be over optimistic. The investment package in China is also likely to improve sentiment and may increase activity in the market in the short term. This, coupled with rising scrap costs, should push Asian average long products prices upwards over the next few months.
New capacity coming on stream in China could upset the supply / demand balance in the third and fourth quarters. A reduction in steel consumption in Japan is anticipated later in the year as the effects from cancellation of building projects emerge. Consequently, steel price declines are forecast for the second half of 2009.
Source: MEPS