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.