Steel Industry in a Dilemma Now

07 Oct 2010 • by Natalie Aster

Manufacturers in developing nations like India will have to struggle in the coming days to keep their steel business intact.

According to a UK-based consultancy, construction activity has resumed in India due to the upcoming festival season which is expected to increase demand. However, steelmakers have raised prices in September due to escalating production costs surrounding construction projects, which is problematic for customers as they are not in a stable position to afford the price hikes.

Russia’s steel sales have not recovered from their pre-recession levels and are now hovering around 15-20 percent below those levels, even as shipments to domestic customers increase. Prices for the country’s high grade scrap, 3A scrap, were volatile, adding to producers woes.

All of this has fuelled expectations that domestic steelmakers are contemplating another round of price increases and attention is now being focused on export prices.

MEPS said Turkish steelmakers have more supply than expected after sales following the three-day Eid festival were lower than anticipated, so long and flat product producers were forced to re-assess their domestic production. Ex-works prices, which is when the seller allows the buyer to leave his goods not yet cleared for export at the seller’s warehouses, have stayed strong.

The Ukrainian steel industry has remained unchanged but domestic plants will expecting some problems in the near future because steelmakers are having issues with working capital.

According to MEPS, construction companies in the United Arab Emirates have been only purchasing small amounts of material despite an increase in construction projects. Unlike Turkey, the Eid festival did not force suppliers to alter their initial quotations. However, there is still concern for 2011.

South Africa continues to struggle as steel trading, the manufacturing sector and construction have all remained low.

Brazil is clouded in uncertainty as producers are discouraging steel imports due to a steady influx over the last year, MEPS said. Steelmaker’s have lowered their flat product prices which is expected to be well received by distributors as most of these distributors are still holding steel inventory they had paid higher prices for earlier in the year.

In Mexico, production remains grim as there have been no improvements in the construction and manufacturing sectors. Production levels have not met their pre-economic crisis levels and change does not appear to be on the horizon as inventory levels are high.

Source: Kitco News


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