Analyst: Steel prices to continue falling

Monday, November 24, 2008

Steel prices will likely continue plunging in the next few months, ratings agency Moody's Brasil VP and senior analyst Richard Sippli told BNamericas.

Some of the main reasons for diminishing prices, according to the analyst, are excessive stocks in distributors' warehouses, steep declines in Chinese consumption, increases in Chinese exports and high production costs.

Sippli said prices of hot-rolled plates in September were US$983/t and fell to US$850/t in October.

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"Prices at the beginning of Q3 were US$1,030/t and have fallen more or less 15%," said the analyst. "It is going to be a long three to four months."

The analyst said automobile inventories are so high in Brazil that Italian automaker Fiat had to rent space in a Belo Horizonte airport to store its automobiles. The construction sector, which was projecting consumption of 40bn reais (US$17bn) in the beginning of the year, said sales will not surpass the 30bn-real mark in 2008.

He said the tendency is for most steel price categories to have their prices follow a similar pattern. In other words, prices of hot and cold rolled coils, slabs and flats will drop by 15%.