During the past year, steel prices soared, as iron and steel manufacturers were forced to accept huge price increases from iron ore and coke producers. The brunt of the increase came in February and March, but prices continue to rise on a daily basis. This may bring new problems to manufacturers, as strong demand on emerging markets has brought about inflationary pressures. Also leading to the high demand has been the infrastructure spending toward urbanization in Asia, the Middle East, and other regions.
By May 2008, the billet price soared up to US$900 per ton, almost doubling within a year. Billets are used in the production of steel, mainly for construction purposes. It is also used as the steel industry index.
During the past three to four months, steel prices have risen by about 50% in the U.S., making the soaring steel prices a global trend.
At this juncture, growing imports will not be sufficient to relieve the tight supply in the market in the short term. Consequently, transaction values will most likely climb through the middle of the year. However, ordering is likely to be kept to a minimum, due to credit restraints being imposed by lenders, restricting buyers on volume steel purchasing. Steel prices are expected to continue to rise through the second quarter. Over the summer, due to lower levels of buying activity, price increases should come to a halt.
The economic outlook for the second half of 2008 is uncertain, especially with the threat of a US recession remaining high, which may lead to a drop in steel consumption.
The credit crunch will also have an affect on new projects. Consequently, a fall in transaction values is expected. Most selling figures should recover by a small amount in 2009, as inventories will need to be restocked.
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