What is bad news for steel producers may be better news for metal stampers …
Financial News – Yahoo! Finance
Shares of North American steel producers dipped Thursday, after a Morgan Stanley analyst said supplies and capacity are growing just as demand is likely to slow down.
Capacity on the rise may mean a reduction in steel prices.
Just a few days ago, MEPS said something similar, although with slightly different timeframes.
The import threat is receding and volumes are expected to drop significantly – providing opportunities for the domestic mills to capture a much greater share of the slightly weakening consumption. Inventories at the service centres and OEM’s will need to be replenished in the final quarter of this year and beyond. The mills’ order intake should improve over the coming months leading to extended delivery lead times. This, in turn, should tighten the supply side and allow the domestic mills to push for higher prices from customers. Of course, with the prospect of rising input costs (including iron ore, coke freight and scrap), the mills will have sound cause to lift selling values for the early part of 2008.
With the prospect of a slow down in the US economy after recent financial problems we are not confident that real demand for steel will expand in the second half of next year. The recent fall in interest rates may help but confidence in the housing market may not return for some time. This impacts on sales of consumer goods and residential construction projects – affecting all the flat products. Third quarter 2008 steel price agreements could be the high point of the year for most product categories.
We continue to predict a further modest reduction in the average long products price in North America up to the turn of the year. Difficulties in both the residential and commercial construction sectors are likely to restrict real demand and opportunities for the mills to push for price increases. However, no major collapse in selling values is anticipated because input costs to the mills will, almost certainly, increase and the import threat is likely to diminish.
From: MEPS 02.10.2007 forecast