The decline in the price of coal and iron ore will reduce the cost of steel production by at least US$150/ton, and steel prices will show a â€œWâ€ shape. First, the price will continue to decline due to inventory clearance, and then rise with the increase in demand brought about by infrastructure construction, but it will drop again due to the reduction of input costs and the increase in supply, and will eventually rise due to the overall rise in demand.
Morgan Stanley, the US financial group, said in a report yesterday that due to the continued decline in demand from construction companies and automakers, steel prices will fall by 19% this year based on their previous forecast.
Morgan Stanley believes that with the world's largest steel consumer China's steel stocks reaching a record high, the steel market has begun to move toward oversupply. It is expected that global steel demand will be reduced by 11% this year, while China's demand will decline by 5.5%, the first decline in the past decade; global steel output is expected to decrease by 24% this year.
According to China Steel News, Morgan Stanley estimates that global steel prices will average 502 US dollars/ton this year, a 19% reduction from its previous forecast of 619 US dollars/ton; Steel prices are expected to be US$485/ton next year, 2011 The annual price is 526 US dollars / ton. It also expects that the Australian iron ore agreement price this year will drop by 40% on the basis of 2008, to 51.9 US dollars / ton, the Brazilian mine will be reduced by 35% on the basis of last year.
In addition to Morgan Stanley, other financial institutions have also recently lowered their expectations for global steel prices. Taking hot-rolled steel coils as an example, according to China Iron and Steel News, Macqurie expects its price to fall to US$447/tonne and UBS expects it to fall to US$459.5/tonne. China's will be 3142 yuan / ton. Macquarie believes that the decline in the price of coal and iron ore will reduce the cost of steel production by at least $150/ton, and it is expected that even by 2011, the world's demand will still be lower than in 2007. UBS believes that steel prices will show a "W" shape. First of all, the price will continue to drop due to the inventory clearance, and then it will increase as the demand for infrastructure construction increases, but it will drop again with the reduction of input costs and the increase of supply, and will eventually rise due to the overall recovery of demand.
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