Price curve fol­lows Chi­nese

The Weekend Australian - Review - - Steel Spe­cial Re­port -

fright­en­ing ex­ist­ing US steel com­pa­nies. Ger­many’s ThyssenKrupp is plan­ning to spend $ US3.7 bil­lion to erect a steel fin­ish­ing com­plex in Al­abama. The pro­posed plant, sched­uled for com­ple­tion by 2010, will process steel slabs im­ported from a $ US2.4 bil­lion plant that is be­ing built by ThyssenKrupp in Brazil.

Mean­while, other steel­mak­ers are look­ing for low- cost lo­ca­tions for new ca­pac­ity. Global Steel Hold­ings, based in the United Arab Emi­rates, is plan­ning to in­vest $ US2.8 bil­lion in Bangladesh, steel­mak­ing be­ing one of the op­er­a­tions it wants to de­velop there.

In­dia’s Mit­tal is also in­ter­ested in Bangladesh, a del­e­ga­tion from the com­pany vis­it­ing Dhaka in early June. If it were to build a steel plant there, that would make 28 the num­ber of coun­tries in which Mit­tal makes steel. Tata Steel is re­ported to be one of 10 steel com­pa­nies in­ves­ti­gat­ing whether it wants to be part of a $ US3 bil­lion in­te­grated steel project in An­gola. The suc­cess­ful ap­pli­cant will part­ner An­golan state- owned Fer­ran­gol in the project which in­volves de­vel­op­ing a 200 mil­lion tonne iron ore de­posit, build­ing a steel plant and rail­way.

Apart from po­ten­tial trou­bles with the US, the other mat­ter that must be play­ing on the minds of eco­nomic plan­ners in Bei­jing is the way in which metal prices, and par­tic­u­larly steel, are fu­elling in­fla­tion­ary pres­sures. The Peo­ple’s Daily re­ports that steel prices within China climbed 7.8 per cent in May over the same month the pre­vi­ous year. But stain­less steel prices saw an ex­tra­or­di­nary leap year on year — a 37.4 jump.

Steel prices are, how­ever, ex­pected to fall as the end of 2007 ap­proaches. Gold­man Sachs JB Were, in their lat­est re­port on steel in­puts ( met­al­lur­gi­cal coal and iron ore), noted that global steel mar­kets con­tin­ued to show re­silience to Chi­nese over- pro­duc­tion and ris­ing net ex­ports of steel prod­ucts, brought about mainly by strong de­mand from Rus­sian, Mid­dle East­ern and Black Sea mar­kets.

But the an­a­lysts said that, with US steel de­mand now fall­ing and sea­sonal weak­ness in buy­ing within Europe, they con­tin­ued to watch closely for ev­i­dence that the steel cy­cle was turn­ing. There is a grow­ing ar­gu­ment for some trans­par­ent global bench­mark for the $ US500 bil­lion steel mar­ket, some mech­a­nism that will give more open­ness about set­ting prices and al­low more hedg­ing of risk by al­low­ing cus­tomers and the mak­ers of steel to lock in prices. The Lon­don Metal Ex­change has been look­ing at a steel fu­tures con­tract, as have the New York Mer­can­tile Ex­change and the Shang­hai Fu­tures Ex­change.

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