WSD believes that there is a potent and beneficial "Age of Discontinuity" (a new pattern of events that is not consistent with those of the past) on the horizon for the global steel industry. The steel industry's two most recent Ages of Discontinuity - the USA financial crisis in 2008 and the euro zone sovereign debt crisis in 2011-2012 - had a negative influence on shipments and profit margins for many steel mills. Looking ahead to 2015, however, the next Age of Discontinuity may have a substantially positive impact on the mills' shipments and "pricing power."
The steel industry's next Age of Discontinuity may occur in 2015 when two potent forces come together at the same time. These forces are: a) an improved steel demand outlook, as the global industry returns to the higher-steel-demand-growth Open Road path from the Rutted Road path; and b) a huge rise in steel futures trading activity that permits almost universal hedging against the steel price risk.
The use of liquid steel futures curves will be a progressive and mutually beneficial endeavor for both steel mills and buyers. In times of increasing margins, the forward curve will give the mill the opportunity to extend the price, and vice versa for steel buyers. And, mills that offer this service will likely see an increase in demand, and more repeat customers.
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