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Higher steel prices ‘hard to sustain’

Marrakech, March 10, 2010

A jump in steel prices at the start of 2010 looks hard to sustain as growth in global demand remains weak, industry officials and traders said at an Arab steel conference in Morocco.

Several top steel producers have announced price increases since the start of the year after a sharp rise in raw material costs such as iron ore and scrap metal.

But uncertainty over whether buyers grappling with big stockpiles will accept the price increase dogs the sector and analysts say a strong rebound in demand this year is unlikely.

Many traders were expecting buyers in the world's top steel consumer China to re-enter the market after the Chinese new year in mid-February, helping support the higher prices, delegates at an the conference in the Moroccan city of Marrakech said.

'It didn't happen,' said Roberto Rubini, a regional manager at traders Coutinho & Ferrostaal. 'One reason for the rise in prices is raw material costs, but I think there was also a political move to boost the market. With no demand behind it, this kind of move is not useful.”

Industry watchers suggested a lack of visibility over steel demand for the rest of the year, as industrialised nations grapple with tightening public finances, heavy debt and weak consumer demand.

'People should be careful -- the situation is not stable,' said Bilal alk-Sheikha, vice president of procurement and logistics at Saudi firm Attieh Steel. 'Demand is weak and costs too high. There is risk in China, which aims to control growth.”

Import Barriers

Industry officials said Arab world steel consumption would grow 10 per cent this year on 2009's consumption of 41 million tonnes, as higher oil prices provided funds for transport infrastructure and housing projects.

But longer-term prospects remain uncertain, given customs barriers and a ramp-up in production by many local producers.

Steel consumption in Egypt leapt 40 per cent last year to 9.15 million tonnes, driven by a national housing construction drive and state spending on steel-intensive infrastructure.

A lot of the demand was met by imports, with purchases of foreign reinforced bars jumping from zero in 2008 to 2.7 million tonnes last year, according to figures provided by Ezz Steel.

Cuts in Egyptian steel prices led to a slump in imports in the second half of 2009 and the government said in January it was considering anti-dumping measures against Turkish imports.

Ezz Steel Corporate Marketing Officer George Matta forecast Egyptian rebar demand growth of 4 per cent to 7.5 million tonnes in 2010.

He said new rebar capacity and the restart of an Ezz flat steel plant able to produce 1 million tonnes would mean a sharp drop in Egyptian steel imports this year.

Industry officials forecast continued growth in steel imports in Libya, Algeria and Morocco this year, but projects for new local steel plants remain slow to materialise.

Imanol Lizartna, export manager at Bascotecnia Steel, a Spanish builder of steel rolling mills, said the firm aimed to conclude this year a deal worth almost 100 million euros ($136.1 million) for an 800,000 tonne melt shop and 300,000 tonne rolling mill in Algeria. – Reuters




Tags: Imports | Marrakech | steel prices | 2010 | Arab Conference |

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