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Steel, zinc prices to face downward pressure

Keywords: Tags  AMM's Galvanized and Coated Metals Conference, hot-rolled sheet, steel prices, zinc prices, scrap prices, John Anton, IHS Global Insight, Lisa Reisman MetalMiner

DEARBORN, Mich. — This year is on course to be a relatively flat year for steel and scrap prices, largely due to macroeconomic concerns and low-cost imports, according to IHS Global Insight’s John Anton, noting that zinc prices are also likely to be range-bound, with little to push them higher.

"The risk is firmly on the downside," Anton, IHS economist and director of its Insight Steel Service, told an audience during a panel on price trends Tuesday at AMM’s Galvanized and Coated Steel Conference in Dearborn, Mich.

With Chinese macroeconomic growth slowing its pace, Europe still poised for disaster and a slow domestic recovery, there will be demand pressure on steel prices, he said, also noting the effects of a slow housing recovery and a large amount of domestic sheet capacity.

"We’re not out of a recession," Anton said. "We’re not to pre-recession levels. And oversupply could be a problem."

The U.S. construction sector remains a barrier to price increases as well, with an excess of strip malls, office buildings and factory space hanging over the market. Housing starts are expected to rise this year, but they still remain far below their peak thanks to excess inventory, he said.

Meanwhile, the gap between imported and domestic prices contributed to a flood of imports early in the year, Anton said. "We’ve seen some incredible import spikes," he said. "Imports of plate have been undercutting plate prices for months. It’s started being seen some in sheet (prices)."

Domestic prices for hot-rolled sheet have remained at $34.50 per hundredweight ($690 per ton) since mid-April, but are down from $37 per cwt ($740 per ton) at the start of the year, according to AMM data.

The price gap between hot-dipped galvanized sheet and imported product can’t last, Anton said, adding that the price for hot-dipped galvanized sheet is about $130 per tonne higher in the United States than in China and Europe.

The conference panelists were bearish on the outlook for zinc prices, which can also affect the price of hot-dipped galvanized sheet, depending on the coating weight.

"If galvanizing demand drops, if Europe becomes weak, if China softens more—we think those are all downward price pressures," according to Lisa Reisman, managing director of MetalMiner. "We think (the price of zinc is) going to be range-bound this year."

Higher prices have little support, Anton agreed, forecasting zinc prices in a range of $1,800 to $2,150 per tonne this year.

Both Anton and Reisman cited an available supply, thanks to high stocks of the metal in warehouses, as one of the main factors that would weigh on prices.

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