Prices Of Steel Slip As Output Increases

The world's steelmakers are increasing output despite softer demand, pushing down prices.

In a few countries, notably Brazil and the U.S., steel prices remain high, thanks to steady demand in the former and limited output in the latter. AK Steel Holding Corp. in February said it would increase, by $50 a short ton, prices for all of its carbon, flat-rolled steel products, a move followed by other U.S. steelmakers.

But U.S. prices -- especially for hot-rolled steel, a key component used in most steel products -- could be headed lower too, says Peter Marcus, economist and steel analyst for World Steel Dynamics Inc., a consulting firm.

'Steel buyers in the United States are bearish on the price outlook for hot-rolled,' he says. 'They're now receiving offers for hot-rolled band from abroad in the $740-$800 per-net-ton range, which compares to the domestic price in the $870-$890 per-ton range.'

Many global steelmakers increased production in the second half as world economies strengthened. But price increases followed because of stronger demand -- and higher costs for raw ingredients, such as iron ore, coal and scrap -- across a broad spectrum of products, such as premium automotive-grade steel, pipe and tube for energy markets and plate steel for ships. The price of plate steel rose 22% in major steel-producing countries and the price for pipe and tubing rose 14% in the second half.

Now, prices are falling as demand softens, in part because of unrest in the Mideast, the effects of Japan's earthquake and tsunami and relatively high supply. In China, the world's biggest steel producer and consumer, annualized steel production rose 16% to 708 million metric tons in February from November, according to the China Iron and Steel Association. Steel prices in China meanwhile have fallen around 8%-10%. 'The fundamental problem the Chinese mills have faced in recent times has been strong competition among the 30-plus entities selling their products to the same customers,' Mr. Marcus says.

Outside China, February steel production rose to an annualized rate of 827 million metric tons, slightly higher than the peak of 811 million metric tons reached in May, according to World Steel Dynamics.

Prices for key raw ingredients are falling as well. Prices for iron ore fell about 9.5% last month from February on the spot market, aided by plentiful supply.

While analysts don't believe lower steel prices are part of a longer-term trend, they could continue to fall as buyers and traders wait and pit sellers against each other. Mills in Russia, India, Taiwan and parts of Europe have tried to boost prices between 2% and 7% for several types of steel, but some buyers are holding off.

'It would not be prudent for us to buy more steel now if the prices are continuing to drop,' says Stanislav Khazanov, steel buyer for Central Steel Co., a small Moscow-based buyer that also has operations in India and Ukraine and buys steel for use in tool making. 'We have about six weeks of inventory that is sufficient. I believe prices will drop another 2%-5% in the next few weeks.'

Mr. Khazanov isn't alone.

'There is something of an impasse in the West European market as customers prefer to sit on the sidelines rather than place business at the inflated levels being demanded by the domestic producers,' according to MEPS International, a U.K.-based steel consulting firm.

Zambia Drops Charges in Chinese Shooting Case

The Zambian state prosecutor has dropped charges against two Chinese mine supervisors accused of shooting at least 13 Zambian miners during a wage protest in October, a government official said Tuesday.

The trial of Xiao Li Shan and Wu Jiu Hua, former managers at Chinese-owned Collum Coal Mine, is now closed, an official with Zambia's Directorate of Public Prosecutions told Dow Jones Newswires from Zambia's capital, Lusaka.

'The state dropped the charges and court doesn't have to make a ruling on the matter,' he said, adding that the prosecution failed to get the witnesses needed to proceed with the trail.

The two defendants had been charged with 13 counts of attempted murder.

On Monday, after prosecutors first moved to drop the charges, activists and union leaders had called upon the government to continue with the trial.

'This is a deliberate unwillingness by the state to pursue a criminal act,' said Robert Mwanza, head of the Citizens Democratic Party of Zambia, Monday. 'We are disappointed, yet not surprised by this turn of events that sets a bad precedent that our investors can abuse our workers and get away with it.'

Company officials couldn't be reached for an immediate comment.

After the shootings, locals rioted and blocked the road to the mine. The Zambian government and the Chinese embassy in Zambia later ordered Collum to improve conditions for workers, and in November management announced a higher bottom wage rate plus a housing and transport allowance, and also offered to compensate the miners who were shot with a total of at least 375 million Zambian kwacha ($79,787).

Union representatives weren't involved in the deal, according to Sikufela Mundia, president of the National Union of Miners and Allied Workers Zambian. Unions have accused management of Collum, a major supplier of coal to copper and cobalt mines, of denying their workers chance to join trade unions.

Chinese-owned enterprises have in recent years pumped millions of dollars into Zambia's mining sector in search of minerals for resource-hungry China, but have often been accused of poor labor practices.

Results of a government inquest into the shooting of six miners at Chinese-owned Chambishi Copper Mine in 2005 has never been made public.

For jewelers, all that glitters this year isn't necessarily gold

Big jewelry chains are scrambling to cope with the rising price of bullion while striving to keep their baubles affordable for consumers still cautious in their spending.

Some are cutting back on the amount of gold in their products and turning to less expensive metals from silver to tungsten. Jewelers also are buying precious metals in bulk at fixed prices to hedge the risk of further spikes.

Even so, jewelry prices are likely to rise due to higher material costs. This year, gold prices have risen 22%, settling Wednesday at $1,336.80 a troy ounce, near a record high in nominal terms. Silver is up 52% and platinum is up 12%.

'If our costs go up, customers understand prices will go up as well,' said Mark Aaron, vice president of investor relations at Tiffany & Co.

The moves are aimed at helping the industry recover from anemic sales in the last few years. U.S. jewelry sales fell 2.7% in 2008 and another 1.6% in 2009, according to market-research firm Mintel International Group Ltd.

Gold's growing favor among investors worried about inflation and falling currencies has made the gold market far less reliant on jewelry demand. Jewelry accounted for 52% of gold demand through the first three quarters of this year, down from 73% in 2005, according to GFMS Ltd., which tracks the gold market.

In tonnage terms, the amount of gold used for jewelry plummeted by 35% between 2005 and 2009.

The fall-off has coincided with the decade-long gold rally, driven by investor interest. Since the end of 2000, when the gold price settled at $272 a troy ounce, it has nearly quintupled.

Jewelers have scrambled to adjust. Ben Bridge Jeweler Inc., a division of Warren Buffett's Berkshire Hathaway Corp., is selling more silver and platinum items, and has added wedding bands made of cobalt and tungsten at its 73 stores in 12 mostly Western states, according to Jon Bridge, a company executive.

'We've been looking at a lot of different alternatives,' said Mr. Bridge. 'Part of it is price driven, part of it is fashion driven.'

Will Hong Kong's housing market finally cool?

The government's latest measure--which includes charging a stamp duty fee of 15% on properties sold within six months of purchase, 10% on those sold within six to 12 months, and 5% on those sold within one to two years--is meant to subdue the market by combating speculation.

But previous initiatives haven't done much to corral prices, rising at a 20% annual clip over the past two years. In the past year the government has tried increasing the land supply and temporarily suspending real estate from the Capital Investment Entrant Scheme, which offers visas to those making qualifying investments in Hong Kong, and still the market charges ahead.

Some say Hong Kong could be on the verge of a bubble burst that could sink housing prices as it did in the late 1990s and early 2000s.
Denise Yam, an analyst at Morgan Stanley Asia Limited, and Albert Wong, senior executive director of Midland Holdings, face off whether the latest effort will be effective.

Ms. Yam: Government Measures Will Curb Speculation

'We welcome the latest anti-speculation package, which will hopefully serve to curb destabilizing speculative activities amidst capital inflows and preempt painful adjustments when conditions reverse. We believe the latest measures could slow the surge in property prices, but should not bring about a sharp correction, as we see limited impact on the fundamental supply/demand conditions.'

Mr. Wong: New Fees Shatter Consumer Confidence, Prices

'Transactions dropped 80% this weekend compared with last weekend, and this is because of the government measure. The market has sent a very bad signal to tell the government this measure will hurt confidence in the property market.

Sonia Cheng is no Paris Hilton

The 29-year-old granddaughter of New World Hospitality founder Cheng Yu-tung is a tough-talking Harvard-grad.

Even so, she has her work cut out for her.

As the newly named executive vice chairman of New World Hotels, Ms. Cheng will manage a $1.1 billion expansion plan in greater China: 'We will do whatever it takes to be competitive within the markets we enter,' she says, noting that the company's goal is to develop 40 hotel properties in China over the next five years 20 are already in the pipeline. The unit of New World China Land Ltd., which was relaunched recently as New World Hospitality (from New World Hotel Management, Ltd.), currently owns eight properties in China.

Ms. Cheng is not one to forget about tradition, but there are old-school things about luxury hotels she won't miss, as well as some new-school trends she thinks won't last. Read about her pet peeves below and take the poll: Do you agree?

1. Too much service (in the wrong places): Bellboy service these days, says Ms. Cheng, is often more disruptive than it is helpful. 'When it comes to the business traveler with one carry-on suitcase, is it really necessary to make them wait in the room while a bell boy brings up the luggage separately?' she asks.

2. Too little service (when you want it): 'During check-out, why can't the reservationist get me a car to the airport? Why do I have to walk over to concierge to arrange this?' she asks. The traditional system of labor division in hotels translates to a less seamless experience for customers.

3. Over-the-top design: 'We're taught to not judge a book by its cover, but with hotels, why are people so easily sold by design?' she asks. In her opinion, design-centric hotels run the risk of becoming gimmicky, and cutting corners in service. Sooner or later, she hopes, guests will learn to look beneath the surface.

4. Bed covers: Whenever she checks into a hotel, Ms. Cheng says the first thing she does is pull off the bed cover. 'Who knows how often they wash it?' she says. 'What's wrong with a simple clean, white bed sheet? Do we need a heavy and useless bed cover to represent luxury?'

5. Too much technology: Ms. Cheng isn't happy about how the iPad has infiltrated its way into many services at other hotels, from checking in to ordering room service. 'Since when did a normal room-service menu become insufficient?' asks Ms. Cheng. She owns one at home, but she says that in hotels, the iPad and other gadgets ─ such as rooms with automated air conditioners and light switches ─ sometimes end up creating more problems than they solve.

Huawei Technologies must be wondering what it has to do to catch a break in the U.S. It's surely not alone

Flush with cash, Chinese companies have the potential to launch a wave of overseas acquisitions. Asian companies as a whole had cash balances of $228 billion by the end of June, up 60% from the end of 2008, Moody's says. Chinese and Hong Kong-based firms account for 45% of that total.

But Huawei's recent experiences in the U.S. point to how suspicions of Chinese companies' backgrounds and motives continue to stymie their overseas plans. The privately owned telecom equipment giant is in trouble with the Committee on Foreign Investment in the U.S., for not seeking approval for a $2 million acquisition of some staff and intellectual property from Californian startup 3Leaf Systems in May.

This is just the latest chapter in Huawei's difficult relationship with U.S. regulators. The company -- thought by some to have links to the Chinese military, something it denies -- saw its proposed acquisition of 3Com blocked in 2008 on national security grounds.

Other potential Chinese buyers are in a similar bind: State-owned giant China Mobile, holds the most cash of all, having grown its balance to $47 billion. Like Huawei, though, it faces some difficulties finding targets in countries that won't get the shivers about letting a Chinese company into their telecom sector.

Not all prominent Chinese firms encounter problems, it should be said. Alibaba.com has this year made two acquisitions in the U.S., for example. Others are changing their tactics. State-owned oil major Cnooc was famously blocked when it tried to buy Unocal in 2005: But it's back in the U.S., this time buying a non-controlling 33.3% stake in one of Chesapeake Energy's shale-oil and gas fields.

The road to the mall may be paved with good intentions

'Buy me!' And this holiday season, they're rolling out more tricky marketing strategies to encourage recession-scarred shoppers to spend. 'Shoppers are dealing with a whole new arsenal of tricks,' says Kit Yarrow, a professor of psychology and marketing and Golden Gate University in San Francisco.

Merchants have always used marketing tricks and rotating sales to encourage consumers to open their wallets, but this year, they're pushing every psychological button they can, retail experts say. Competition for shoppers, plus a tepid holiday shopping outlook, means retailers are doing whatever they can to attract deal-hunting consumers' attention ─ all in an effort to entice them into spending more than they'd planned. That means adding worry-inducing purchase limits to indicate scarcity, promising free gifts to shoppers who spend just a little more, and offering rewards today to redeem later just so people will come back to the store.

These strategies work in part because they tap into hard-wired behaviors that go back to our days in caves. Long before we were confronted with half-off Merino turtlenecks or buy-one-get-one-free smartphones, we learned to stockpile in the event of shortage and to compete for scarce resources, psychologists and neuroscientists say. The stakes are considerably lower when you shop, but studies have shown our brains react similarly nonetheless. The effectiveness -- and proliferation -- of these mind games are a big part of the reason you're apt to look back and wonder why you thought that buying three itchy sweaters for $50 or a $200 no-name television was such a good idea.

Get to know these seven hidden triggers, and next time you go shopping you can look at retailers' pitches with a more critical eye -- and maybe avoid blowing your budget:

'Shop today and save 50% next week.'

Aimed at: Your best intentions.

Why you fall for it: The promise of bigger savings in the future appeals to people who think they can game the system, says Lars Perner, an assistant professor of clinical marketing at the University of Southern California's Marshall School of Business. You figure on buying just one or two things now, then returning to pick up a few more. But volume-driven retailers are using the now-and-later tactic this year to steer consumers back to stores when they know they'll have new stock or other promotions that help you buy more than you planned.

It's similar to the 'buy a little bit more and get a free gift' promotion, Perner says.

'Limit five per person.'

Aimed at: Your competitive spirit.

Why you fall for it: Limits trigger a feeling that the deal is so great that, if not for that limit-four-per-customer rule, shoppers would be filling their carts to the brim, leaving none for you, says L.J. Shrum, the president of the Society for Consumer Psychology and the marketing department chair at the University of Texas at San Antonio. Setting a limit increases the likelihood you'll buy at least one, and it's even more effective if you were already planning to buy one of the item.

Higher numbers in promotions have the same effect, according to a 2007 study in the Journal of Retailing. Changing the structure of a sale from 'Buy two' to 'Buy eight' resulted in a 55% increase in sales ─ regardless of the price of each option, says study co-author Kenneth C. Manning, chair of the marketing department Colorado State University. This year, limits are showing up on anything a store wants to get rid of. You'll even see limits on items that might seem absurd to purchase in multiples, Shrum says.

'Our Big Sale ends tomorrow/today/in a few hours.'

Aimed at: Your survival instincts.

Why you fall for it: Fear, pure and simple. This tactic appeals to a basic instinct to grab what's available or be left without, says Noah Goldstein, an assistant professor of human resources and organizational behavior at the Anderson School of Management at the University of California, Los Angeles. Think of the crowds stocking up on bottled water and canned goods before a major storm comes through. In those frenzied hours, it's a matter of survival.

Retailer e-newsletters have made it easy to extend that tactic online, and many retailers send multiple emails to shoppers as the end of a sale nears. And they often respond.

'Get 23% off.'

Aimed at: Your love of a bargain.

Why you fall for it: Real estate brokers have long known that uneven pricing (say, $524,755 versus $525,000) catches buyers' attention, because those odd numbers suggest a bargain that has already been marked down -- whether that's actually the case or not. This year, retailers have picked up on that tactic this year as a way to separate their sales from the sea of 20%-off offers, Yarrow says.

'We have a great deal on the accessories for that, too.'

Aimed at: Your long-term investor.

Why you fall for it: Once the consumer has already made a decision to buy and to pay, it's easier to convince them to add related ─ but maybe unecessary ─ items to their purchase, Shrum says. That's because in your mind, you already own the product, making you more vulnerable to pitches for things that promise to make the purchase more useful or less vulnerable. A 2009 Carnegie Mellon study found that consumers were more likely to buy warranties on purchases if they thought doing so would extend the life of their gadget or preserve its value. And shoppers who felt they were being offered an un-advertised deal were 42% more likely to buy. This is particularly common with products that would be expensive to replace, like smartphones or tablet computers.

'Save $250! (New price: $500.)'

Aimed at: Your price-sensitive side.

Why you fall for it: Touting big savings or using a gigantic font in an ad puts the deal at the center and makes the actual price an afterthought. What's more, your brain often perceives the actual price as more reasonable because of that big price drop, says Perner.

Stores have used this tactic more during the recession to sell higher-priced items, hoping that you'll take a closer look at the washer that has the splashy discount, even if it is more expensive than other models, he says. This trick works, experts say.

'Get a free gift with your $50 purchase.'

Aimed at: Your inner child (who wants a present, too).

Why you fall for it: You were already planning to buy one sweater, but you're one additional belt purchase away from getting to get a free scarf. At the store, you don't think about the $20 price tag or about how rarely you actually wear a scarf. Instead, your mind sees the free gift as an additional reason to buy the primary product in the first place.