Onset of cyclonic depression in mid August after the unbecoming downgrading of US economy and intensifying of European debt crisis took toll on the already pliable steel market.

Apart from acquiring a transnational hue the collapse in export levels was so back breaking that even the Chinese juggernaut retraced into submission. USA and EU nations being largest trading bloc for China left an indelible mark on the Chinese market. As the domestic levels plummeted so did the raw material prices. Chinese export levels became pugnacious with each passing week but lacking the teeth as buying vanished. Despite offers flying thick and fast transactions were few.

Middle Eastern market which has never been part of even the occasional blips in other regions has acquired the notoriety of being the backwaters of global steel industry. Turkish mills were coerced into production pruning alike the Black Sea counterparts with post Ramadan expectancy fizzling out in no time.

Mediterranean ring nations viz., Italy, Spain, Portugal etc became the sacrificial bate in European debt melodrama impaling business beyond redemption. Banks becoming extremely niggardly in giving credit lines buying became bleak and need based. At the same time an emaciated Euro made imports preposterous. The complexity and virulent nature of the crisis portended to overshadow the glossy French and German economies as well.

CIS mils essentially thriving on exports it became a question of survival. Export levels for both long and flat products plummeted briskly losing a whopping USD 80 per tonne to USD 100 per tonne in 3 months. In a rear guard action to arrest losses mills curtailed production and occasionally took obdurate postures of sticking to a floor price which became misnomer with passage of time. Eventually in the face of receding order books and pillaging Chinese offers which had the audacity to challenge these mills in their bastion they meekly succumbed.

Sensing an opportunity to give some sense of direction amidst ambiguity we bestowed upon us the noble task of perusing the market dynamics and rejigging the varying postulates. Even though it was like looking for needle in a haystack we attempted to juxtapose contradictory as well as concurrent factors to evolve a definite pattern in the process giving a shade of solace to the beleaguered operators.

Crystal ball showed same hazy though definite outline about the emergence of trend. Dissecting the below numbers a striking resemblance between the weekly and forecasted price movements, by www.steelprices-india.com team during the Steel Market Meet at Mumbai on October 14th 2011 is evident.

If in billets both the levels have taken an identical dip by USD 60 per tonne it has been closely replicated in HRC correcting by USD 60 per tonne actual vs USD 40 per tonne forecast. Considering the lower price band in both categories the comparison appears even more accurate with a perfect match in billets and marginal variance of USD 10 per tonne in HRC.

Undeniably any forecast risks being an exercise in futility presently. However the close approximation of our numbers with the actual numbers affirms the veracity of our postulates in charting a course in nebulous setting.

FOB Black Sea

In USD per tonne

FOB Black Sea

In USD per tonne

In sunset of 2011 no major shakeup is plausible however the recent price trends point towards a bottoming out in long product prices as billet prices hit the floor. Scrap prices likely to escalate with winter scarcity and Turkey opening the floodgates the cost push will play stellar role creating a tide in Gulf waters. Prophetically the European crisis should abate in due course as the desperate economic and political measures of the EU will bear fruit.

Long product prices in China have appreciated by an impressive 1% within a week sending the rebar futures in tizzy. Iron ore prices have been gradually improving over the last 10 days. Climatic forecast indicative of an equally fortuitous deluge in Australian mines a repeat of last year can certainly spiral raw material prices to ignite flare up in finished as well.

Inconclusively we can opine that despite unavoidable seasonal recess in market New Year might just tilt the balance favourably.

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Products covered
1. Input materials - Iron ore, scrap, sponge iron, pig iron pencil ingot, billets and blooms
2. Long products - Rebar, wire rod, angle, channel and joists
3. Flat products - Narrow plates, wide plates, HR, CR and galvanized
4. Others - Pipes

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