Prices for carbon steel products will increase early next year, predict MEPS (International) Ltd, the UK based steel market analysts.

Customers’ stocks have been dwindling in recent months as buyers have resisted purchasing significant volumes in the current economic climate. However, a change is likely to take place in the short term. Steel input costs are starting to rise. Inventories are low across the supply chain. Reductions in demand for steel are being matched by output curbs at the producers, through temporary plant closures and extended holiday shutdown periods in the New Year.

Spot iron ore prices have started to increase from their recent low point created by credit restrictions in China. These have now been relaxed – opening up the spectre of renewed buying of iron ore and coking coal on international markets. Furthermore, scrap selling values are escalating. These higher input costs are expected to feed through to an upturn in finished steel product prices early next year.

With tight supply and reduced stocks at consumers and distributors, MEPS predicts that steel sourcing professionals will start to reorder material in the first quarter of next year, ahead of impending price rises. Improved mill order books would encourage steelmakers to lift selling values to recover the growth in their input costs amid tightening supply conditions.

The steel price recovery is not likely to be long lasting, however, believe MEPS. These are testing times for all industries in the EU. Underlying market demand is forecast to remain quite weak across the region into 2013. If, as expected, market supply improves then price fragility will return - probably before the end of next year.

Source: MEPS - European Steel Review November Edition - Also See: EU Steel Prices Online