Corus left shoulder or the foothills?

GFMS Mildly Positive On 2006 Steel Market
December 15 2005 - Australasian Investment Review – (AIR)

There are a lot of arbitrage opportunities in today’s steel market, researchers at UK based GFMS point out.

China is making hot rolled coil available at around US$350/tonne free on board, while the price for hot rolled plate has also dropped to below US$400/tonne fob. Meanwhile in the US, domestic HR coil is priced above US$600/tonne and plate well over US$800/tonne.

If it wasn’t for some protective laws in the US, Chinese steel would probably flood into the country. Now it’s the rest of the world who will have to carry most of the burden.

GFMS analysis confirms earlier reports that the weakness in Asian markets has now spread to emerging markets, while at the same time it is "destabilising" mature markets.

In terms of steel supply, GFMS believes it is definitely going to rise through 2006. The researchers keep their hopes up this should be absorbed by the improving global economy and a cyclical upturn in inventory building.

Chinese steel production is anticipated to continue to climb, and thus the country’s exports will rise, but GFMS sees no flood of Chinese steel coming out of the country in the new year. The researchers do believe China will exert a destabilising influence in the global market in 2006 in that it will limit price appreciation that may have occurred without it.

Copyright Australasian Investment Review.

(With acknowledgements to a mate who decoded this copy protected article and e-mailed it to me. He has promised to let me into the secret next time he is in town).