Steel: Drop in Raw Material Cost Expectations

Consensus Forecasts

The price of steel has drifted lower in recent months, constrained by a lack of global demand and the recession in Europe. Despite lower input costs (iron ore), steel producers continue to face a significant squeeze on profit margins, especially for those with no captive raw material links. Coking coal (another key ingredient in the production of the durable metal) has declined in recent quarters, but an ongoing pay dispute at the Dendrobium mine in New South Wales threatens to choke production. Overcapacity and a shift toward substitutes could keep the price of steel at a low level over the next year.

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