The MEPS – World Average Long Products price moved upwards slightly in May. However, this was primarily due to exchange rate movements against the US dollar. The majority of transaction values quoted in domestic currencies fell this month. Muted demand and oversupply put negative pressure on selling figures around the world.
Further hikes by mills could be difficult to implement considering the poor level of demand, particularly from the construction sector. Consequently, MEPS expects prices to stabilise in the near term.
The rainy season in parts of Asia is likely to limit end-user demand in this region. Ongoing volatility in the Middle East may also restrict sales of steel products to these countries. This, coupled with anticipated reductions in raw material costs, is forecast to result in steel price decreases in the final quarter.
The world economy is expected to pick up early next year, with building activity likely to improve. Increased market demand could lead to supply shortages due to reduced mill production levels and low inventories at most distributors. Consequently, steel prices are forecast to recover during the first half of 2012.