The rebar contract being traded since last October on the Dubai Gold and Commodities Exchange has been slow in developing. The New York Mercantile Exchange plan to launch a sheet steel futures contract within the next six months may be scuttled since the exchange is being absorbed by CMER Group (formerly the Chicago Mercantile Exchange, and relocated to the Midwest.

That leaves the London Metals Exchange plan to launch steel futures contracts for rebar-quality square billet this summer. The LME has signed steel billet warehousing agreements in three locations—Jebel Ali, United Arab Emirates; Johor, Malaysia; and Inchon, South Korea—and expects the first physical deliveries will be possible in late July or early August.

With the LME futures plan developing, GFMS Metals Consulting of London has launched a regular research service, titled “The Steel Market Futures Briefing,” that will analyze market developments in the steel bars and billets, and associated raw materials. In his first report, GFMS chief analyst Neil Buxton forecasts that world billet and rebar prices soon will come off recent highs.

Buxton says that global billet prices had risen to $900-950/metric ton in early April while rebar varied widely between $800-$1,200/metric ton, depending on the regional market.

“This illustrates our thesis that markets that are reliant on re-rollers of merchant billet to supply the marginal tonnage, such as the Middle East and Asia, will pay a significantly higher price than those markets that are integrated, such as China and the U.S.,” Buxton writes. “As the billet market has undergone a structural squeeze over the last 12-18 months with the withdrawal on the supply side of the Chinese and the massive expansion of re-rollers in the Middle East and North Africa, the billet merchant market has been pushed sharply upwards.”

So where do prices go from here? The GFMS forecast suggests that global billet and rebar prices are due to peak and then slide. Reason: Chinese supply is growing, Middle Eastern seasonal demand has peaked, demand remains weak in Western Europe and the U.S. continues to buy imports that are priced higher than domestic-made material.