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Friday, April 30, 2010

Steel prices may fall sharply: Official Friday, April 30, 2010

Steel prices are likely to decline in the coming months due to a reversal of the same factors that led to a sharp surge in recent months, the head of the Ministry of Steel's Economic Research Unit has said.

Chief Economist, Joint Plant Committee, A S Firoz said, "Steel prices have perhaps reached their peak. I see potential weakening of the same, especially for long products, from now on."

"I expect prices of HR coils to fall from the current level of $750 per tonne to about $600 to $650 per tonne by November or December, 2010," he said yesterday.

Explaining the rationale for his forecast, Firoz said, "What one observes currently is a reversal of the factors that led to a surge in steel prices. For example, inventory liquidation over the coming period will replace rebuilding of stocks so far.

"There are new concerns in the global investment scenario also, which may cause a disruption in the capital market, especially in the emerging economies, thereby reducing investment confidence," he said.

"There has already been some fall in long products prices in the world market, although the prices of flat products have remained unchanged overall for the time being. The prices of steel scrap and sponge iron have also slipped considerably. These are indications of a weakened steel market," Firoz said.

However, there are some experts who predict that the direction of steel prices could move even further upward in the coming months. Industry expert and OreTeam.Com director Sachin Sehgal, who has a long association with the steel and iron ore industry, said, "If you look at infrastructure demand from India and China, there are still projects worth $5-10 billion in the pipeline. All these projects will require steel and cement and both will do well."

"Prices will continue at a high level and even touch peaks as demand from India and China is very strong. Infrastructure projects will drive demand for steel and if demand is strong, there is no way they (steel prices) will come down," he said.

With respect to iron ore prices, Sehgal said they were expected to remain firm in 2010 and would be determined by the actions of the three big players, namely BHP Billiton, Rio Tinto and Vale.

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