Steel prices seen to rise in 2009

The price of steel is expected to go up early next year as global manufacturers of steel raw material announced their output due to the expected drop in global demand, cutting down production, the Federation of Philippine Industries (FPI) said.

“There is a possibility of a price increase but definitely it would not be that big because this year the price of steel in the world market decreased significantly,” Jesus L. Arranza, FPI president said in an interview.

According to Arranza, local steel makers are expecting a tightening of supply which indirectly leads to higher prices.

The galvanizers are the most worried as they import about 92 percent of their requirements for cold-rolled coils (CRC), the major raw materials for roofing sheets, Arranza said.

An industry source who spoke under the condition of anonymity said the only way for the country to avoid price increases is for Global Steel to increase its production. Global Steel has not been operating at full capacity.

If the Indian firm cannot produce enough to meet the local demand, the source said it is better for the government to remove the tariff on steel. “Probably the government can do the same for steel as it did for cement.”

Earlier, the government announced it is removing the tariff on cement in order to reduce prices.

Meanwhile, the roofing industry informed the FPI that the country imported 194,000 tons of CRC in 2007 while the domestic supply is only 15,000 tons.

Early this month, Arcelor Mittal, the world’s biggest steel producer is cutting its fourth quarter production by nine million tons from the third quarter volume of 29 million tons.

Tata Corus Steel will slash its output by 20 percent up to March 2009, while China’s largest steel maker Baosteel will cut production by one million tons over the next three months.

Nippon Steel Corp., the world’s second largest manufacturer, will also decrease its output by one million tons from October 2008 to March 2009, and another Japanese firm JFE Steel will also implement more cutbacks in production.