WSJ piece on steel, mentioning "U.S. prices dropped 50% in the first half of this year" ..................................
From below :
U.S. prices dropped 50% in the first half of this year in the face of a global glut, coming off historically high levels.
Yet another item in a long list of signs that the Federal Reserve is dead wrong ...
Jon.
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November 7, 2005
Higher U.S. Steel Prices Could Draw Cheap Imports
By PAUL GLADER
Staff Reporter of THE WALL STREET JOURNAL
Steel is becoming significantly more expensive in the U.S. than in the rest of the world and might draw more imports in coming months.
The price of hot-rolled coil, the most common steel product, has risen to about $600 a ton in the U.S., compared with about $380 a ton in China. That divergence is expected to attract an influx to the U.S. of low-grade products from China and possibly higher-grade products from other markets in coming months, damping the outlook for some U.S. steel producers. That same influx would be good for American steel consumers because it would moderate U.S. steel prices.
Steel is also costlier in Europe than in China, yet the gap is narrower, so that region's steel industry isn't expected to be hit as hard by imports from Asia.
China, the world's largest steel producer and consumer, is on pace to make a record 350 million metric tons of steel this year. The country's steel industry continues to oversupply its domestic market for lower-grade steel products, and as China's steelmakers seek to get rid of their excess products, they are driving down prices in neighboring steelmaking countries such as Japan and South Korea.
U.S. prices dropped 50% in the first half of this year in the face of a global glut, coming off historically high levels. Inventories have since declined, and demand has grown in the U.S. and Europe, bringing prices up 20% so far in the second half.
Steel imports to the U.S. fell to 17.1 million tons in the first eight months of 2005 from 17.7 million tons in the same period last year. Still, China's exports to the U.S. almost doubled to 1.6 million tons in the first eight months of 2005 from 892,000 tons in that period of 2004.
Steel-company executives in the U.S. and Europe are predicting that strong customer demand will bolster steel prices in the fourth quarter and going into 2006. "Inventories are low," said Guy Dollé, chief executive of Luxembourg's Arcelor SA. "Customers and distributors will have to increase inventories to deliver the products the customers want."
The Metal Service Center Institute, in Rolling Meadows, Ill., said the steel inventories of its members declined to about a 2.8-month supply, or 12.9 million tons, in September from 3.5 months in July, or 14.3 million tons. Scrap prices also have picked up in recent weeks, giving steelmakers such as Nucor Corp., based in Charlotte, N.C., reason to maintain steel prices.
While U.S. steel mills and some Wall Street analysts say they expect buyers to return, others say they believe steel purchasing might slow as winter sets in and cheap imports become available. If that happens, U.S. steel companies may be setting up for another glut in the first or second quarters of 2006, triggering a price slide similar to the 10-month decline from late 2004 through the first half of this year.
"You have surging supply and falling demand, and I think there is a real risk that prices will fall dramatically as a result," said Paul Scott, a steel expert at CRU Analysis in London. "Next year, I think, steel prices as a whole will follow a downward trend."
Write to Paul Glader at paul.glader@wsj.com
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