05-06-2006

North American Markets

The rising trend in price levels in North American markets have belied hopes for an early stability. It is now widely being apprehended that there is likely to be a sudden crash in the prices in the fourth quarter. HR prices are now quoted at around $630 per tonne fob mills, while CR and galvanised sheets are available at $750 and $860 per tonne respectively. Growing demand from construction sector as well as from the service centers coupled with domestic supply constraints have contributed to the rising price. Although level of imports into USA are once again surging following high prices in the domestic market, a part of the demand is also emerging from stocking activities. Imported rebars and wire rods are offered at $500 and $520 per tonne. Latest projection on massive current account deficit in USA constituting nearly 6.8 per cent of GDP has already led to rising interest rates and this may affect the boom in housing and other construction activities in the later part of the year.

European Market

European markets are showing signs of price revival and current projections signal a continuation of the rising trend. Cut in production and growing demand from the major user segments are at the root of increasing prices. HR coils, CR coils and galvanised products are offered in Germany at euro4 er cent more than 2005 level. Although China is resisting such increase for its imports of ore in 2006, the fat rise in cost of major inputs would have a definite impact on the cost of steel. Long product prices in European markets are under pressure mostly due to cheap imports and tight supply-demand position.

Asian Market

Major Chinese producers have raised prices of HR and CR at least by $33-$35 per tonne for Q3 2006 transactions as compared to Q2 level. However the rise in prices is relatively lower compared to the previous three months. Long product prices in Asian markets are high following stable demand from construction. The threat by Chinese government to withdraw the export tax rebates may result in oversupply in the domestic market and hence price decline. Posco has already announced a $30 per tonne rise in HR prices.

Global production of crude steel in first 4 months of the current year has registered around 6 percent rise over corresponding period of previous year. China, as expected, has marginally slowed down the level of production, but still at a reasonably high rate of 18 percent. India's has achieved a growth of nearly 21 percent in production, which is highest in the world during the period. The lowering of production level is uninterrupted in Europe, South Korea, Ukraine and Brazil, while Middle East and Russia have registered positive growth.

Crude Steel Production during Jan - April 2006