Substantial increase in MEPS-Global All Products Composite price for April

KUALA LUMPUR: A substantial increase of US$80 (RM256.6) per tonne was noted in the MEPS-Global All Products Composite price last month. Advances were also recorded for all categories in all regions researched during April, according to a statement by MEPS on May 11. This was due, mainly, to considerable increases in mill input expenditure coupled with supply shortfalls in some areas.

Price was also boosted by growing demand from the automotive and domestic appliance sectors, while sales to most other end-users increased as buyers purchased ahead of further impending price hikes. The real demand improvements were, however, only modest in many steel-consuming segments, said the leading independent supplier of steel market information.

Meanwhile, MEPS’ forecast has been upgraded in April. World selling figures will, almost certainly, climb further in the short term due to rapidly escalating raw material values. However, restricted availability in the market should ease as blast furnaces re-start over the coming months in most parts of the world. Steel price rises are likely to be limited in 3Q2010, said MEPS.

“We believe that spot market iron ore costs will fall in 3Q2010 as world crude production growth declines. Due to the time lag involved for the new quarterly contracts, this will impact on mill input expenditure during the final trimester of 2010,” it said.

Hence, a decrease in the MEPS – Global All Products Composite price is predicted later in the year, but a revival in transaction values is envisaged early in 2011 as the world economy strengthens.

MEPS is of the opinion that the new pricing mechanism for iron ore and coking coal could see renewed interest from speculators and this would add to the already volatile spot market prices. “The implementation of an iron ore surcharge on steel sales in the longer term is a possibility in the future”, it said.