Producers see further drop in steel prices

By The Nation, Bloomberg
Published on October 9, 2008

Fall to continue into next year, signals lower costs for builders, automakers

Producers see further drop in steel prices

Construction cost has signalled to dropped when steel price fall.

Steel prices are expected to drop in the fourth quarter of the year and continue their slide into next year as demand from automakers and builders drops, Thailand's largest steel plant Lao Peng Nguan's president Pipat Preedawipat said.

He said demand for steel in the Asian market has dropped after the Olympics. As a result, steel prices are expected to drop significantly - 510 per cent - in the last quarter of the year into next year. This is likely to have a positive impact on the cost of building highrises, which need significantly more steel to construct.

Earlier, Nippon Steel, the world's No2 producer of steel, and Baoshan Iron and Steel led a decline in Asian steel producers's shares on concern that demand from automakers and builders will drop amid a global credit crunch and economic slowdown.

Nippon Steel plunged 7.8 per cent to close at ¥319 on the Tokyo Stock Exchange. Baoshan Steel, China's biggest steel producer, dropped 8.8 per cent to close at 6.63 yuan in Shanghai, and South Korea's Posco plunged 7.7 per cent.

The MSCI Asia Pacific Index is headed for its lowest close since 2005 as the global credit crisis deepened in Europe and the United States lost the most jobs in five years. US auto sales last month had their biggest decline in 17 years and Chinese mills have cut prices and output on slowing domestic demand.

"There are too many negative factors and not enough positive ones affecting steelmakers," Hyundai Securities analyst Kim Hyun Tae said in Seoul.

"Slowing growth will mean less demand for cars and other products that use steel. Another concern is the drop in steelproduct prices led by China."

Benchmark Chinese steel prices have dropped 18 per cent to 4,863 yuan a tonne from a June 5 record. The Hebei Iron and Steel Group, Shougang and two other steelmak¬ers in northern China will cut out¬put 20 per cent this month because of weak demand, the China Securities Journal reported with¬out citing a source.

"The global financial crisis and the slowing economy have had an impact on the property and auto¬mobile industries, sending steel prices down faster than raw mate¬rial costs," Citic Securities chief analyst Zhou Xizeng said.

Tata Steel, India's largest pro¬ducer, declined as much as 9.5 per cent to 355.6 rupees and is the fifthworst performer on the Sensitive index this year.

The stock lost 41 per cent of its value last quarter, the most since the three months ended December 1992. The share last traded at Rs357.4.

Angang Steel, China's No2 steelmaker, dropped to the 10percent daily limit to close at 7.92 yuan in Shenzhen trading.

Wuhan Iron and Steel also fell by the limit to 6.78 yuan in Shanghai.

Dongkuk Steel Mill tumbled 12 per cent to close at 29,000 won in Seoul trading.

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Producers see further drop in steel prices

Fall to continue into next year, signals lower costs for builders, automakers

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