Investing.com - Financial Markets Worldwide

When Steel Prices Will Hit Bottom

Published 05/25/2012, 06:01 AM
Updated 07/09/2023, 06:31 AM
FTNMX651010
-

Contrary to some points that we covered in Part One, not everyone agrees we are in for a prolonged period of falling steel production and lower raw material prices.

Falling thermal coal prices have as much to do with rising coal supply as lack of demand. Shale gas in the US has replaced coal consumption for electricity production to a near-35-year low, according to DOE figures in the FT, leaving thermal coal producers offering supplies for export and depressing prices.

Falling iron ore prices are said to be due to the anticipation of increased supply from Australia and India, combined with an end to weather-related disruption at Vale’s Brazilian mines. As prices have fallen, Chinese consumers in particular have differed shipments and even canceled contracts, preferring to draw down stocks. Goldman Sachs sees this as a positive for second-half consumption, arguing the Chinese will have to come back into the market and are probably waiting for lower prices.

Who is right? That remains to be seen. Comments by Premier Wen of China reported in Reuters this week suggest the Chinese are intending to embark on a new round of infrastructure investment to boost domestic growth and ensure the slowdown is not a stand-still. Wang Jun, an economist at the China Centre for International Economic Exchanges, a government think tank, is quoted as saying he expected the thrust of the investment to focus on highways, railways, nuclear power and thermal power plants.

The second and third quarters may represent the trough in what could prove to be a return to growth later this year and next.

BY Stuart Burns

Latest comments

Loading next article…
Install Our App
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2025 - Fusion Media Limited. All Rights Reserved.