We believe that in US, Japan and Europe, steel consumption has bottomed and demand, while still sluggish should improve going forward. China meanwhile, has clearly bucked the trend so far.
In CY09E, we expect global apparent steel consumption to decline 9.8% before growing by 5.0% in CY10E.
Positive on steel prices in the medium term, but believe a small hiccup could be on the way
Based on our demand-supply model, we expect CIS HR prices to range between $440-570/tonne in 2HCY09, with an average price of $505/tonne. For CY10E, we forecast CIS HR prices to range between $470-605/tonne, with an average price of $535/tonne.
However we believe that at present, metal prices seem a little ahead of the economic recovery curve.
Further, we believe equity markets are, currently, discounting a fair amount of recovery in steel prices. This prompts us to have a cautious stance on the sector in the short term. We would recommend investors to take advantage of any dip in prices.