♦ Steel price rally likely to sustain over the near term. We believe that global steel price strength is likely to sustain over the near term, underpinned by:
1. Rising iron ore prices. Given that the annual iron ore contract price has yet to be finalised and global iron ore miners are pushing for a significant increase in 2010 iron ore contract prices, we believe spot prices of iron ore are likely to trend up further and this will lend support to steel prices globally;
2. Seasonally strong demand. Steel consumption is seasonally strong in 2Q on the back of good weather and worldwide seasonal stock replenishing activities; and
3. Less concerns on overcapacity, at least for now. This is mainly on the back of the still-rosy near-term demand outlook. Also helping, is the Chinese government’s intensified efforts in curbing excess capacity in the country’s steel sector.
Building Materials : Near-Term Outlook “Steel” Good - 29/03/2010
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