How long can the current market trend be sustained?

Wednesday, 09 April 2008 14:32:46 (GMT+3)   |  
       

During the closing session of the SteelOrbis Spring 08 Conference, the chairmen of the Producers Committee, Raw Materials Committee and Traders Committee shared with the general audience the outcome of the Committee Meeting discussions regarding the question of how long the current market trend can be sustained.

Mr. Uğur Dalbeler, Chairman of the Producers Committee, stated that the uptrend was likely to continue for some time given the strong demand coming from the Middle East in particular. The producers expressed confidence that sustainability of the rising long product prices would be maintained. Although the $1,000/mt price level of rebar has psychologically affected buyers, the need for buying material is there and the purchases will keep on going.

The reduction of demand in the US and EU markets apparently is not enough to prevent product prices from climbing as local mills in these markets keep on increasing their domestic prices as well. In an environment where scrap is in short supply, where freight is expensive and raw material availability is restricted, the producers' view is that prices will maintain their strength.

Mr. Öcal Gebelek, Chairman of the Raw Materials Committee, agreed with the producers and went on to explain that scrap prices are moving up at the same tremendous rate at which demand for scrap is increasing. Expansions and newly-added capacities and furnaces in countries such as Japan, South Korea, Russia, Egypt and Turkey are increasing the scrap requirements on the steel producers' side, inevitably resulting in the rise of this material's price. Mr. Gebelek stressed that not only scrap prices, but also the prices of pig iron and ferroalloys are on an upward trend due to the decreased availability of supplies.

Mr. Bernd Grabow, Chairman of the Traders Committee, addressed the fact that, despite the general upbeat outlook of the market where prices are projected to remain at elevated levels, the financing side of the business is putting a burden on customers and, in this context, demand is weak in the EU and US markets for the time being.

In spite of all the above-stated views that in general the longs, and particularly the rebar market, appears likely to keep its strength in the coming months, fuelled by high freight rates, raw material prices and strong demand coming mainly from the Middle East, one would be well-advised to carefully monitor the situation as regards demand in the currently depressed economies.


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