Following continued price increases until mid-2006, global steel prices have begun to ease slightly over the past months. While several producers have announced prices hikes, mounting overcapacities are putting pressure on price levels, already strained by China's rising exports. Some steel companies have recognized these developments, however, and are steering against the trend by reducing their own output. In the latest edition of Consline Steel Trends, we continue to analyze current market developments and give forecasts on prices until the second quarter of 2007. Following is a quick extract of the information provided in the full report. Steel prices have reached higher levels up until summer, but what will happen with the start of next year? • Steel prices have stabilized during the year showing only slight declines in the second half of 2006. • There seems to come pressure on prices as stocks are filled and demand slows down; in addition, China will achieve net exports of around 20 million tons in 2006, thereof 4 million tons to Europe. • Sector consolidation still only has a small impact on pricing, but there is a trend visible that companies are opting for more strategic moves instead of allowing broader price corrections. • Steel input prices will probably increase in 2007; iron ore price hikes are estimated at 5% to 10% while scrap supply will see shortages due to rising steel production and lower export capacities. Most indicators foresee a decline in prices, but the downturn does not seem to be significant at the moment. Production capacities are rising, leading to massive overcapacities in the future Additional capacity by country • Production capacity is going to increase during the next years mainly driven by Brazil, China, Russia and India:
Country surplus capacity timeframe Brazil 62 mln tons 2008 China 119 mln tons 2008 Russia 27 mln tons 2016 India 72 mln tons 2020• While China plans to reduce capacities by 50 to 90 million tons in 2007, McKinsey estimates that a closure of up to 175 mln tons is necessary by 2007/2008 to balance supply and demand. • According to information on capacity to come online during the next years, there are several forecasts concerning overcapacity for the future: - 260 mln tons overcapacity by 2010 (Wirtschaftsvereinigung Stahl, Germany) - 300 mln tons by 2010 (McKinsey) Please click here to reach the details of the extract and the full report of Consline Research & Consulting www.consline.com