As indicated in the accompanying exhibit, the extreme run-up in the WSD world price for hot-rolled band from 2007 through the summer of 2008 was mimicked by home-market prices in the USA and Western Europe. In China's case, at that time, with domestic deliveries being so massive and exports relatively low, the price run-up, although substantial, was far less than that in most other regions of the world.
From a peak export price of about $1,097 per tonne, FOB the port of export, in the summer of 2008, by the summer of 2009 the HRB export price had plummeted to only about $396 per tonne.
We also observe that since the summer of 2009: a) the Chinese HRB domestic ex-works price has consistently been lower than the HRB export price; b) the current export price at about $285 per tonne is well below that in the summer of 2009 (which is why many steel mills' balance sheets are being wrecked; c) the USA home-market price in 2014 rose to a massive premium to the world export price - at times as much as $200 per tonne; and d) unlike prior episodes of pricing "death spirals," the current experience has not been a brief pricing bottom followed by a sizable rally. One reason for item "d" above, is that steel production has been sticky on the downside at least through October 2015.
This report includes forward-looking statements that are based on current expectations about future events and are subject to uncertainties and factors relating to operations and the business environment, all of which are difficult to predict. Although we believe that the expectations reflected in our forward-looking statements are reasonable, they can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties, including among other things, changes in prices, shifts in demand, variations in supply, movements in international currency, developments in technology, actions by governments and/or other factors.
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