Steel Raw Material Prices Are Low Is A Temporary Phenomenon

Of ore, coke, fuel oil and other raw materials of steel market conditions, we must adhere to the “two-point.” On the one hand, to see the world economy is still down, consumer demand is difficult to rapidly improve short period of time, the relevant enterprises should prepare for “tighter day”, not blind optimism; the other hand, we should also recognize that the present prices of steel raw materials downturn is temporary, the financial tsunami will run back to high situation. To this end, should cause great concern to plan ahead and respond.

A, iron and steel raw material prices are low, only a temporary phenomenon

From the second half of 2008, at home and abroad Iron ore , Scrap steel, coke, steel and other raw materials prices drop, a drop of more than 30% in general, high in 50%.

Steel production prices of raw materials is the major factor in the substantial decrease in both domestic and international economic slowdown, a significant slowdown in consumer demand, leading to global overcapacity. According to the business center of circulation Productivity Measurement, 2008, 1? November the country’s apparent consumption of steel rose 4.9% year on year reduction of 16 percentage points.

Slowdown in steel demand, forcing China’s steel companies generally cut production in Q4 2008, some crude steel production fell directly reduced iron ore, coke usage. China is the current world number one steel producer and consumer of imported raw materials (including indirect consumption), the Chinese iron and steel raw materials a significant slowdown in consumption, that the world demand for raw materials because of the financial tsunami is found to have weakened. In addition, the periodic revaluation of U.S. dollar, speculative capital is pulled out also played the role of price pressure.

Raw steel production outlook market outlook, as some economic data is still not satisfactory, including China, the global economy is still down, Western economies have developed into a recession, consumer demand for short period of time is difficult to rapidly improve in the future there possible new outbreak of “demand earthquake,” such as world auto giants could collapse and so on. Affected, short term global demand for steel raw materials is difficult to rapidly improve, the market price will be vulnerable to run, there will be further down, such as long-term agreement Iron ore price Fell more than 20%.

The other hand, if we observe their eyes the farther, extending to one or two years later, influenced by many factors, long-term supply of steel raw material supply and demand will be tight, the market price back to run high . The idea that the financial tsunami will return to the international oil price 60 U.S. dollars / barrel, or 100 U.S. dollars / barrel on a high. Under this pattern, the world steel production raw material prices rise accordingly, the price slump is only temporary.

Two of the four major factors supporting the price of raw materials to reproduce the high level of steel production run situation

Steel production rising raw material prices to regain momentum, into high-priced running situation is determined by the following areas:

(A) from the demand perspective, the collective “rescue” with great effect after the fat

Since the outbreak of financial crisis, countries in the world including China attaches great importance to have generous “rescue” such as large-scale public expenditure, interest on loans and gradually approaching to zero, more liberal foreign trade policy. Expected in the future there will be new measures to introduce to stimulate demand. These policy measures over time, after fermentation, will show much of the “latecomer effect”, coke, ore, scrap steel steel furnace consumer demand may exceed the expected strong recovery. If the optimistic, we will never see a big “demand crisis”, such as the collapse of the world’s auto giants, larger financial institutions in insolvency, the market demand for raw steel production will probably rise in 2009, even pessimistic, there are more serious situation, will resume in 2010, but will not sink as long as several years or even 10 years of “the long winter.”

Sharply due to external demand, China’s economy slowdown.

BOLA TANGKAS