On November 25th 2011, Germany based global financial service provider Deutsche Bank AG's Sales and Trading unit released a market outlook report covering the major steel markets.

According to the report, at steel mills, whose margins are under pressure, the only thing that can support pricing in this low demand environment is a cut in production, leading to a decline in iron ore prices.

The Deutsche Bank report went on to state that, in the steel and scrap markets, flat products sentiment in Europe is weak and, aside from some small subsistence bookings of hot rolled coil, galvanized iron and cold rolled coil, little activity has been observed. Market participants expect the market to remain weak over Christmas and into the start of Q1 2012.

In the US, although there has been some reports of some service centers paying a slightly higher price than the average, the majority of consumers are talking about a weak end to the year and are not looking to buy more than the bare minimum.

Denoting that steel inventories are still shrinking in the West, the report expects signs of improvement in the Chinese market before price improvement in the Western markets as most buyers assess China before rebuilding their inventory.

The report also says that production cuts have been deployed early in the cycle at a time in which inventory was starting at a lower base level relative to 2008-09. There is less inventory in the system in the Western economies which is supportive once the economic environment improves and credit conditions improve.

(Sourced from Steel Orbis)
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