Despite ongoing concerns about oversupply, world steel prices edged back up in September.
After having fallen every month since April, when prices peaked at $US913 per tonne, the Global Composite Steel Price increased from $US842 per tonne in August to $US852 per tonne in September, according to MEPS Ltd, a British firm of steel analysts.
Courtesy of high inventory levels and a weakening global economic outlook, however, downward pressure on prices is set to remain. In China, current inventory levels of iron ore are now sufficient to support steel production for 35 days, according to China Iron and Steel Association Vice Chairman Zhang Changfu.
Prices for other key metals used in construction, such as copper and zinc, continue to tumble (see charts). Copper prices are now below $US3.25 per pound whilst prices for zinc sit at just above $US0.85 per pound.
Despite having settled over the past week, the Australian dollar, too, remains low. The Aussie closed against the greenback on September 30 at $US0.9781, barely unchanged from the start of last week but well down from its level of $US1.0691 at the start of last month.
Economic weakness continues
Driving much of this are ongoing concerns about the global economy.
To be sure, there have been some positive developments on this front over the past week. The latest data from the US Department of Commerce Bureau of Economic Analysis shows that the American economy grew at an annualised rate of 1.3% in the three months to June, up from 0.4% in the March quarter. Also, prospects for Europe are looking slightly less dire following Germany’s agreement to the latest rescue plan for the Eurozone.
Still, serious doubts remain about these economies going forward. According to the latest predictions in The Economist magazine, the American economy is set to grow by a modest 1.6% in 2011 and 2% in 2012. Over the same timeframe, the euro area is set to grow by 1.7% and 1.0%. A double dip recession remains a serious prospect in both areas. Growth in China is set to come in at 9.0% in 2011 and 8.6% in 2012, but given weak manufacturing data and a desire on the part of the Chinese government to contain inflation, fears of slowing growth there remain.
Back home, the Australian economy remains in good shape, with growth of 2.2% expected this year followed by 3.8% in 2012, according to The Economist. Though inflation remains a concern, interest rates are likely to remain on hold when the Reserve Bank meets this week as the bank waits for a clearer global economic picture to emerge.
Housing to Remain Weak
Despite new home sales returning to growth (1.1%) in August following steep falls in June and July, the outlook for residential construction in Australia remains subdued.
In its latest National Outlook report released on September 30, Housing Industry Association (HIA) forecast a 10.3% decline in the number of housing starts in 2011/12 to just over 140,000. This follows a 5.8% decline in 2010/11.