Fitch gives outlook for global steel prices - 01 Jul, 2008
According to a new report from Fitch Ratings, Fitch expects that global steel prices will even out in 2008 once cost inflation of raw material is absorbed.
Fitch said that “Prices increases for steel have been rampant during the first six months of 2008 as companies seek to pass through increased raw material costs. The ability to increase steel pricing is essential to maintain margins for producers who do not control their sources of iron ore, coke, pig iron and scrap. Contract price increases for iron ore and coke have added approximately USD 185 per tonne to the cost of blast furnace steel without vertical integration. Energy, freight, scrap and labor cost increases can add another USD 100 per tonne far exceeding original expectations.”
Fitch said that “Growth in global steel demand is expected to run approximately 6% to 7% annually over the next 12 to 18 months and markets are expected to be fairly balanced. Excess production could drag on pricing and further pressure tight raw material markets, while short supply would be inflationary and may dampen steel demand. Regional variations in pricing and profitability have re-emerged, given high freight rates and protectionism.”
Fitch expects further consolidation in the steel space as steel producers have been acquisitive to diversify geographically, to rationalize production and to gain access to raw materials. Fitch added that the outlook on the industry is stable.
