The MEPS World average flat products price increased by 4%, this month, compared with December. At US$691 per tonne, it stands more than 50% above the figure recorded in January 2016.

Further modest rises are envisaged during the first quarter as mill delivery lead times extend in many countries and trade barriers restrict import volumes. However, MEPS predicts that steel selling values are approaching their peak, following strong gains witnessed over the past 12 months.

A key driver for recent steel price increases was an upturn in raw material costs. However, spot coking coal values have fallen by more than US$100 per tonne since early December. This will likely result in a significant reduction in second quarter coking coal contract prices. Furthermore, iron ore values are also expected to decline during this period.

Consequently, with vastly deflated raw material costs, steel prices are forecast to come under downward pressure, in the April/June trimester. However, MEPS predicts that steelmakers operating blast furnaces, will be able to lift their margins, as reductions in input expenditure are expected to outweigh the decline in steel prices.

Source: MEPS International Steel Review and MEPS World Steel Prices