Analyst: “Perfect steel storm still is raging”
Goldman Sachs analyst forecasts hot-rolled steel prices heading towards $1,000
By Tom Stundza -- Purchasing, 4/3/2008 7:46:00 AM
Writing that “the storm raging in steel markets is beginning to resemble a physical shortage,” steel analyst Aldo Mazzaferro at Goldman Sachs Group in New York this morning boosted his price forecast for hot-rolled sheet in coil (HRC) to $950-$1,000/ton in the second-half. “Higher steel prices are driven by two factors: better global demand and a raw material cost push.”
“It is appearing more likely that near-term HRC pricing will reach $850/ton for June (earlier than our previous forecast of August/September),” he writes in note to clients. (Purchasingdata.com earlier this week forecasted $880 for HRC in June.) Mazzaferro says “pricing on the Black Sea, historically one of the lowest-cost sources of global steel supply, now (is) among the highest in the world, and global export supply (is) dwindling due to strong home market demand in traditional exporting countries.”
Upshot: U.S. market pricing will have to inflate quickly and robustly to increase imports in the second half. That’s because the U.S. is “net short of steel,” according to economists, and needs to import 20-25% of its requirements from a world where prices everywhere else currently are higher than in the U.S.
Even if demand in the U.S. falters by 5-10% this year, as expected, strong economic activity in the BRIC bloc on nations (Brazil, Russia, India and China) and other emerging markets, plus strained global of steel and other commodities supply, have triggered increases in steel, aluminum and copper demand and inflated world prices.
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