Steel prices set to bounce but not too high

LONDON: Prices of long steel will bounce back from a recent 30 percent fall once construction work in the Middle East picks up after the summer lull, but weaker global economic growth rules out a return to record highs soon.

The price of long steel, a key construction material, has fallen sharply since July in major consumer the Middle East as work slows due to hot weather and ahead of the holy month of Ramadan in September. So far this year, demand for steel seems to have decoupled from the slowdown in the United States and in Europe as a construction and infrastructure boom in the Middle East and emerging economies buoyed demand.

This, coupled with the sky-high cost of steelmaking raw materials such as iron ore and coking coal, has allowed steelmakers to raise prices several times, pushing them to all-time highs. It may not be so easy to raise prices in the second half of the year, analysts say.

The world’s top steelmaker ArcelorMittal reported record second-half quarter results after it raised prices. Germany’s top two steelmakers ThyssenKrupp and Salzgitter raised their profit forecasts after both reporting strong quarterly earnings.

The price of steel billet, a semi-finished form of long steel mainly used by the construction industry, rose to above $1,200 per tonne at end-June. On the London Metal Exchange three-month Mediterreanean billet contract was bid at $755 per tonne on Thursday. Several traders based in Turkey, a major steel supplier to the Middle East, and in the United Kingdom say that in the absence of European and American physical demand prices eased to around $900 per tonne for Black Sea free-on-board (fob) billets. reuters

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