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Mixed outlook on Japan quake, China inventories

Mixed outlook on Japan quake, China inventories
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First Published: Tue, Mar 15 2011. 10 06 PM IST
Updated: Tue, Mar 15 2011. 10 06 PM IST
New Delhi: Industry experts and producers differed on whether steel prices will rise or fall in wake of the earthquake and tsunami in Japan and slackening demand for the alloy in China.
China and Japan are the world’s top steel producers, but there is a lack of clarity on their future production, and therefore, on prices, with inventories building up in China and reports of some steel mills closing in Japan, they said.
Mixed outlooks for prices of iron ore and coking coal—two key ingredients that make for over half of steel-making costs—also contribute to the unclear forecast on prices.
“There are no indications steel prices are going to soften in the short and mid term,” Joachim Schroder, chief executive of RCG Research and Consulting Group AG, said on the sidelines of the Indian Steel Markets Conference 2011 in Gurgaon on the outskirts of Delhi. Schroder, who said the impact of Japan’s tsunami and earthquake on steel and its raw materials are yet to be gauged, declined to give estimates of steel prices in the near future.
Taking a contrarian view, an analyst in Mumbai said sluggish global recovery, monetary tightening in China, and possibly lower raw material costs could push down prices.
“In the short term, there are going to be big issues (for steel),” said T. Gnanasekar, director, Commtrendz Research in Mumbai. “There is sluggish recovery in the global market and steel is well supplied.”
Gnanasekar said the disruption in Japan could harden steel prices, but only in the very short term. He estimated the London Metal Exchange cash steel price could fall to $400-450 a tonne in April to June from its current $550.
Two Chinese steelmakers—Baoshan Iron and Steel Co. Ltd and Wuhan Iron and Steel Co. Ltd—will keep their main product prices unchanged for April despite weak demand and rising inventories, with the hope buyers would start to stock up, Reuters reported on Tuesday.
This indicates prices may largely remain unchanged.
At the Gurgaon meet, officials of Steel Authority of India Ltd, Essar Steel Ltd, JSW Steel Ltd and Jindal Steel and Power Ltd did not say whether they will revise prices next month.
“If coking coal prices rise, steel prices will go up,” said V.R. Sharma, deputy managing director and chief executive, steel business, Jindal Steel and Power. “The same proportion of the rise will be passed on.”
While iron ore prices are falling with Chinese buyers silent, coking coal prices are expected to be raised for April-June as recent floods in Australia disrupted supplies, said an analyst on the sidelines of the meet, seeking anonymity.
ruchira.s@livemint.com
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First Published: Tue, Mar 15 2011. 10 06 PM IST
More Topics: Steel prices | Iron ore | Japan | Earthquake | Tsunami |