What's in store for steel prices?

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Mike Mytton of Global Steel Consultants says that a small correction in steel prices is expected. He adds that prices in Asia have not moved in tandem with global prices, and that the difference between Asian and US HRC prices is USD 150/tonne.

 

J Mehra, Director of Essar Group says that there is a seasonal dip in demand, and that is no cause for concern. He adds that Chinese makers are under cost pressure, and that prices may not dip. He further adds that HRC prices are seen within USD550-600/tonne for the rest of 2006.

 

Excerpts from CNBC-TV18's exclusive interview with J Mehra and Mike Mytton:

 

Q: Give us the global perspective first. There has been some talk that because of the US slowdown etc, steel could be peaking in the US and generally softening up across the world. Do you subscribe to that theory?

 

Mytton: Yes, I think most people feel that there will be a small correction in steel prices. In fact most people didn't think that it will go this high. In some ways, things have been good for people, particularly in America where prices are high again, almost back to the 2004 peak. That in itself is attracting steel imports into America. 

 

Interestingly, since 2005 end, Asian prices have diverged from Europe and US and so prices in Asia have not gone up in the same way as they have elsewhere, and that is mainly due to the overcapacity in China.

 

Q: Give us a local perspective. Do you think steel globally could be about to soften up a little bit given the economic factor, which analysts are talking about?

 

Mehra: We have been witnessing this kind of a cycle-- up and down for the last three-four years and nothing much can be read out of this because I believe that there is nothing fundamentally that has changed, which should cause any panic signals.

 

If one looks at the kind of construction activities that are underway, there is substantial growth in the country. I see the automobile sector doing well and also machinery. Looking at all these ultimate consumers of steel, I do not feel any sense of panic just because the seasonal demand has slightly dipped. This is normally a season where steel consumption comes down and that is a normal phenomenon. So I am not very concerned at this point in time.

 

Q: For HR Coils in specific and in Asia, put the pricing into perspective, where is it at this point and how much more do you expect it to slacken by?

 

Mytton: I do not know whether the danger is specifically in Asia. I am just pointing out that they haven't grown in the same way as they have in the States.

 

About USD 150 per tonne for hot roll coil is the difference between Asian prices and US prices. 

 

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