Commodity Markets: Facts and Trends

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EDL Anlagenbau Gesellschaft mbH

Pörner Ingenieurgesellschaft mbH

2011 could well see a record steel production of more than 1.5 billion tons of crude steel for the first time ever. Until June, the global production increased by respectable eight percent with China (10% plus) producing nearly half 8700 million tons) of the global steel output. The Chinese production thereby compensates the slower growth of steel production in Europe (plus 6%) and the U.S. (plus 5%). Japan and North Africa even saw production decreases, due to political turmoils and the tsunami catastrophe in spring this year. Wether the demand for steel in the automotive industry, engineering and construction projects remains at its high level is doubtful, due to the recent situation of the world's economy.

Steel Prices: Brief Facts

• Record production of more than 1.5 billion tons of crude steel expected

• Chinese production about 700 million tons/year

• Steel production, Europe: plus six percent; US: plus five percent

• Scrap metal prices stable

• Stainless steel profits from lower nickel prices

• Could Increase by the end of 2011

Scrap metal prices were more or less stable during the last month. Turkey, traditionally a big processor of scrap steel, suffers from the instabilities in the neighbouring North African and Middle Eastern countries. Analysts still think a slight price increase for scrap metal to be possible for fall 2011.

The prices for crude steel, although decreasing slightly in August are still well above the previous year (plus 14%). Iron ore and coke coal remained on a stable level. The IKB expects a medium price for iron ore of about US $ 180 per ton.

Stainless and Processed Steels

Also the production of stainless steels could gain momentum: After a record output of 30.7 million tons in 2010, 32 million tons are very likely for 2011. Although most markets witness strong demands from nearly all industries, the situation in Japan could dampen the optimistic forecast, IKB fears. The analysts also see over capacities in China, so skyrocketing prices are rather unlikely.

Since stainless steels need large amounts of chrome and nickel alloy, their prices have a strong influence one the price of stainless steel. Following slightly falling nickel prices, the prices for hot rolled strips gave in. The difference in price to wire rods therefore increased to US $ 850 per ton.

IKB analysts predict rising prices for chrome and nickel for late 2011, thereby increasing the price for stainless steel to around US $ 3,450/ton (below 4,300 for wire rods).

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