Steel prices may cool down 5-10% by yr-end: Roger Manser

Roger Manser, Global Editor of Steel Business Briefing sees steel prices down by 5-10%, at best by year-end. He doesn't see steel prices going back to levels at 2008-beginning. He said that there will not be significant softening of steel prices by year-end and prices may fall a bit on sentiment but the fundamentals are strong. Iron ore prices will remain stable and coke prices will remain firm, he added.

According to him, steel demand from China is not seen softening and there are lot of investment in steel capacities in China. It may see exports resuming. He feels that US steel demand is strong and there is some softening in Europe.

Excerpts from CNBC-TV18's exclusive interview with Roger Manser:

Q: What do you think is the out look for the second half, we have read a couple of reports suggesting that the steel prices may have had their run for this year, do you share that view?

A: Our global price target has suddenly turned down a bit. So we can certainly say that the sentiment in the market is beginning to turn. But if you look towards the fundamentals of the steel market, we are still reasonably positive on that. So you have two confusing pictures with sentiment certainly beginning to be a little bit more negative than it has been from the bullish past and the fundamentals beginning to turn.

The general view in the market is that prices will remain reasonably firm in Q3, the third quarter of July to September. But most industry analysts and parts of the industry are certainly beginning to see it softening in the final quarter of calendar 2008.

Q: If you could take us through a little more of the fundamentals you spoke about, is there any demand destruction you are seeing coming from the US or maybe from the Eurozone and what’s the scenario in terms of expectations of Chinese demands after the Olympics?

A: There are three main areas to look at. We see firm demand continuing in China. The construction industry, which is very steel intensive, we see that continuing to grow after the Olympics. We don’t see any softening in terms of demand.

In the US, there has been a bit of a surprise from our point of view. Our latest indications from the US indicate that demand remains strong. But the situation remains tight in the US, which is possibly not one might have expected.

It is the opposite in Europe. In Europe, we see some softening in the market because the Europeans are beginning to feel the economic impact of the credit crunch. So we are seeing some softening of demand there. But overall we see demand has been reasonably firm.

If you turn to the supply side however, we do see that in China there is still a lot of investment going in new plants and equipment, new capacity and that will soften prices in China despite the steady demand and that may well mean that there could be a return to increased exports from China in the second half of this year.

Q: You spoke about some softening of the prices perhaps in the last quarter of 2008, from current levels of HR Coils at about USD 1250/ ton; what is the estimated percentage drop in the last quarter and what of 2009?

A: I don’t see really very much. I think there will be some softening. Demand fundamentally remains robust throughout the world. We don’t see a significant softening in HRC – Hot Rolled Coil prices – or in Rebar prices, by the end of this year. But we may be talking of a decline of say 5%-10%.

But we are not seeing a return to the prices we saw in the beginning of this year. We don’t see that happening. In 2009, a lot of it depends on the global economy. The global economy is still holding up very well. Demand from emerging markets such as your own, such as in Latin America, the Middle East, or China are holding up well. And as long as that continues, the supply situation we think will remain tolerably and reasonably tight.

On the other hand, we do have to remember that the raw material situation which may be of interest, we think coke and coking coal prices will remain very firm and probably will increase in 2009. And that will underpin any situation next year and probably also going into 2010. Iron ore prices are fairly stable I would say at a high level.