Updated August 28, 2008

   China, the core world’s exporter of steel, started to cut prices – only by 5% yet. Russia’s metallurgical companies will cut the prices for their products in 4Q as well. The majority of analysts and market participants consider that this drop is seasonal and the peak of prices for the metal falls to 2009. However, some experts suppose that the price maximum has been already crossed and the price drop for steel starts next year.

    In October, Baosteel Corporation, one of the leading steel producers, will cut prices for the basic types of its steel products by the average of $29,24-43,86 per ton. "The price for the cold-rolled steel products will fall by $43,86 per ton, and the galvanized steel will fall by $29,24 per ton, and one ton of the hot-rolled pickled steel products will fall by $14,6 in October", as the agency reports. Shanghai Securities’s expert Zhu Limin names the price drop for the iron ore imported from India to China among the reasons of such price cut. Still, the source is talking about the reduction of the internal demand for steel products in China. According to the data of Lehman Brothers, in July the ton of the hot-rolled rental products totaled $870 per ton in China. So, the drop totals about 5% taking to account this price.

    China is one of the key exporters of steel products worldwide and it directly influences on the level of pricing in the industry. Therefore, the revision of the metal price that since 2004 grew by 140% as per the calculations of Deutsche Bank, is assessed as the beginning of the falling trend at the whole market. However, the opinions of the industry participants on this issue were different. "The steel production is a seasonal business, and the prices drop in 4Q takes place each year", as Deutsche Bank analyst on metallurgy Olga Okuneva marks.

   Actually, as per the forecasts of Novolipetsk Steel JSC, in 4Q the prices for the semifinished products (slabs) and hot-rolled products will cut by 5-10%. International Iron & Steel Institute doesn’t see any fundamental reasons for the prices correction in the industry. The growth of demand for steel and rolled products in 2009 will remain at the level of 2008 and will total 6,3%, as it is said in the company’s review. "I don’t think that the peak of prices rise for steel is over, since the prices for steel and rolled products will be higher in 2009 than in 2008", as Olga Okuneva marks. According to the forecasts of Deutsche Bank, in 2009 the core raw material of the metallurgical companies – iron ore and coal – will grow by 5-10% more. However, thereafter the prices will settle at the steel market, as Mrs. Okuneva says.

   However, Lehman Brothers’ forecasts are less optimistic. The banks’ top-analyst Vladimir Zhukov expects that in 2009 the prices for the steel rolled products will drop within 5%. On the background of the production volumes’ growth, the abolition or reduction of export duties on steel products is expected in China, as China Securities Journal reports. At the same time, the experts expect that the growth rates of the economy in Europe and the USA decelerate. All these factors combined will result in the balance of demand and supply and will influence on prices, as Vladimir Zhukov explains.