"Brazil's economy is extremely steel-intensive and as this economy continues to grow, countries that now count on steel exports from Brazil will have to source materials elsewhere. This will have an impact on the global supply of steel and will cause prices to increase rapidly", said Spoores.
Spoores was part of the "Demand Drivers - What steel consumers are looking for" panel that included Jeffrey Kabel, executive director of global ferrous products at JP Morgan in the United Kingdom; Dongwei Chen, deputy general manager of Sinosteel Futures in China; and Chris Houlden, principal consultant of the CRU Steel Business Unit in the United Kingdom. The CRU Group, which organized the Latin American Iron & Steel Trends conference, invited Spoores to speak because he has closely watched the steel market for Majestic Steel USA for the last five years and recently launched The Spoores Report, a newsletter that monitors industry trends.
During his presentation Spoores urged Brazilian steel industry and government officials to work together to create a certification program for Brazilian pig iron that will remove lingering concerns over questionable labor practices and environmental issues involving the sources of charcoal, a major ingredient in the manufacture of pig iron, which is a key component in steel.
Another factor that Spoores expects to impact steel pricing is a shift in how iron ore is priced. Previously, iron ore had been contracted for annually and only recently the market has shifted to quarterly pricing. "Even with the change to quarterly contracting for iron ore, the current pricing structure lags the market," Spoores said. "Iron ore will likely shift to monthly contracts based on spot prices, much like mills execute for natural gas or zinc. This new structure will bring greater volatility to steel prices and both mills and customers need to be prepared for this new reality."