Asian average carbon steel prices up about US$40 per tonne in May, says MEPS

KUALA LUMPUR: An increase of approximately US$40 per tonne was recorded in the MEPS – Asian All Products Composite steel price in May, with advances noted in flat and long categories.

MEPS, a UK-based global steel sector consultancy, said traditionally stronger construction activity helped to lift selling figures last month. Export opportunities remain low, partly due to unfavourable exchange rates with the West.

It said a modest increase in the Asian all products composite transaction value is anticipated in June. However, this is expected to be near the peak of the current price cycle. The deteriorating financial situation in Europe will likely weaken market sentiment in Asia in 2H2010.

Potential cuts in Chinese export tax rebates could re-direct large volumes of steel back into the domestic market. Nevertheless, an increase in iron ore and coking coal costs for 3Q contracts should help to buoy Asian average steel prices in the short term. A decrease in raw material costs is forecast in the final trimester. This will, almost certainly, push steel selling figures lower towards end-2010.

A recovery in transaction values is predicted to occur after the Lunar New Year. Demand will likely strengthen as the economic climate improves. However, any new measures taken by the Chinese government to restrict activity in the construction industry could limit any steel price rises