[T.S.R:16752] Tata Steel-Corus Combine The Best Bet As Global Steel Price Expected To Jump 66 Per Cent in CY2011

Steel prices are set to jump by up to 66 per cent this year, top executives and analysts have said, a burst of inflation on a scale the industry has suffered just once in the past 70 years. 

In a set of forecasts provided for the Financial Times by 16 steel experts around the world – including six senior executives and 10 industry analysts – projections of the year-on-year rise in prices by the end of 2011 average 32 per cent. That would make the price of the average grade of steel as defined by Meps, a UK steel consultancy, $970 per tonne by December. If this turns out to be correct, the rise in steel prices during the year will be the second-biggest jump since modern records began in the 1940s.  

The largest increase so far, according to Meps data, was the 70 per cent rise in 2004, when steel demand was moving up quickly as the world economy went through a big expansion. 

Rod Beddows, chief executive of Hatch Corporate Finance, which specialises in metals, said he envisaged a rise in prices of 66 per cent by the end of 2011, as the industry reacted to a surge in raw material costs and took the opportunity to push up profit margins that were severely dented in the 2008-09 recession. 

Michael Shillaker, an analyst at Credit Suisse, predicted a rise in prices of 41 per cent by the end of the year. "I think prices will carry on rising throughout 2011 and probably peak in the first or second quarter of 2012," he said. 

Of the top executives in the survey who agreed to give a forecast about prices, the heads of three Indian steelmakers – B. Muthuraman of Tata Steel, Malay Mukherjee of Essar and Sajjan Jindal of JSW – said prices would go up at least a quarter during the year. Wolfgang Eder of Voestalpine said the world average steel price would go up only 13 per cent.  

Alexei Mordashov of Russia's Severstal and Eiji Hayashida of JFE of Japan, the other two chief executives in the survey, said they did not want to try to predict price rises.  

Of the 16 people who took part in the survey, 11 agreed to make projections on prices. In questions answered by all 16 on output trends, the average expectation for the change in global steel output this year was for a rise of 6.2 per cent, which would follow the increase in 2010 of 15 per cent – the highest year-on-year increase since 1955. In the past two months, the price of basic steel has risen 33 per cent, after big rises in iron ore and coking coal.

 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

 

 

 

 

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