Global steel prices, led by those in the United States, might fall this year, driven down by increasing output from Asian mills, Wachovia Corp. predicts.
U.S. prices might average $450 a metric ton compared with $557 last year, Jason Schenker, an economist at the nation’s fourth-biggest bank, said in a Jan. 8 report. The bank lowered its forecast of hot-rolled coil prices by 5.3 percent from its earlier estimate of $475 a ton.
U.S. steel imports probably soared to a record last year as shipments from China more than doubled, the American Iron and Steel Institute trade group said. Rising imports helped send prices lower in December for a fourth straight month as customers such as DaimlerChrysler AG’s Chrysler unit made fewer cars.
“It’s a given that prices will remain under pressure this year,” Schenker said. His forecast for 2008 is $425 a ton. “In the U.S., the pressure is more as imports from Asian countries are available at a lower rate than the prevailing domestic prices.”
China, which makes more steel than the United States, Russia and Japan combined, doubled steel-product exports in the first 11 months of last year. Crude steel output in Japan increased in November for a sixth straight month, the Japan Iron & Steel Federation said in December.
Ratings on steel-industry stocks were cut to “underweight” from “market weight” by analysts at Credit Suisse Group, who said Jan. 2 that weakening demand and rising imports from Asia might lead to lower profits in the United States and Europe.
Steel shares in the United States slid Dec. 12 after Nucor Corp., the second-biggest U.S. steel maker, said its fourth-quarter profit will be less than anticipated because of rising inventories and lower prices. Steel Dynamics Inc., the third-largest U.S. steel maker, cut its profit forecast the next day. U.S. Steel, the nation’s top producer, had already forecast lower earnings.
The price of U.S. steel sheet fell in December to the lowest in 13 months as demand fell, companies delayed orders and imports surged, Purchasing Magazine said last month. Sheet, the most common product used in autos and appliances, fell 5.3 percent to $535 a ton from $565 in November, the magazine said. That’s its lowest price since November 2005.
Steel makers from Asia are likely to outperform their Western counterparts, the Credit Suisse report said, without naming companies from India, China or Japan.
China overtook Britain as the world’s fourth-largest economy in 2005.
“The (steel) demand for India and China will probably help prices remain around $475 a ton this year,” said Tridibesh Mukherjee, deputy managing director at Tata Steel Ltd. Tata is set to become the world’s fifth-biggest steel maker after agreeing to buy Corus Group Plc.
China’s government has cut tax rebates on exports to help rein in growth. Sales of Chinese steel abroad may slump by 23 percent this year after the government reduced incentives, according to the China Iron and Steel Association.