Price curve follows Chinese
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.