Traders at IREPAS look to see beyond August

Monday, 07 June 2010 15:49:43 (GMT+3)   |  
       

On June 7 at the SteelOrbis Spring '10 Conference & 62nd IREPAS Meeting held in Budapest, the Traders' Committee, chaired by Michael Setterdahl from Nucor, and including Wilhelm Alff from Stemcor Europe AG, Butch Zeederberg from Liberty Commodities Ltd, Dirk Weyrather from Coutinho & Ferrostaal GmbH and Bernd Grabow from Macsteel Trading, expressed its views on the current situation in the markets and on the challenges that market players may face in the coming quarters.

The common idea in the committee was that, following a prosperous 2008 till the crisis arrived, and a very challenging 2009, market players were expecting a better 2010. However, up to now, the market is characterized by high volatility and low predictability, mainly due to higher production costs and low demand. High production costs are driven by huge price increases in the iron ore markets, due to strong demand mainly from Asia and particularly from China. Speakers at the committee meeting said that the current situation cannot be sustained if the Chinese mills are also to make a profit. Therefore, if production levels are maintained, for the Chinese mills to turn a profit, either iron ore prices, which are determined according to peak levels in the spot market, will have to go down in the coming quarter, or steel prices will have to increase. Mr. Setterdahl said that the Chinese mills will lose money if they continue to increase their outputs. It is also expected that China's steel exports will decrease in the third quarter this year.

The short-term expectations of Wilhelm Alff of Stemcore are that, due to the approach of the holiday season, the weak demand will slow down further and producers are expected to lower their output. Output is not expected to rise till the end of August. However, Mr. Alff also said that predicting beyond this date is very difficult. The mills are working with lower stocks because of volatility and the macroeconomic situation in certain European markets remains unclear, given the current situation in Greece, followed by the situations in Spain and Hungary. Nevertheless, he added that the real picture would be seen more clearly in October, when the state of real demand would appear with greater clarity.

Participants were asked whether billet, wire rod and rebar prices would increase, decrease or trend sideways at the end of October this year compared with actual prices. The majority of the participants stated that they expect prices to increase. However, the common idea is apparently that prices will be fluctuating for some more time before gaining stability.

At the end of the committee session, Michael Setterdahl told the attendees that it is not so important whether prices increase or not, but what is essential is to achieve confidence and consistency in the market.


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