SBB GMO November 2011

A Steel Business Briefing Publication

November 2011

Eurozone economic crisis may delay start of price recovery in Europe Demand in the mature economies of Europe and United States has continued to weaken after the summer months and it is unlikely that there will be any improvement during the next two months until the new year. Economic indicators in Europe and US are generally implying negative or zero growth in steel consumption in the coming months, and actual growth rates are unlikely to compare favourably with the strong pick-up at the start of 2011.

In Europe, there has not been any restocking since the summer as sentiment has been affected by the ongoing economic problems and compounded by slowlyweakening prices. Restocking will not be needed before the year-end, and it is unclear whether apparent demand will increase early in the first quarter. End-user offtake continues to be poor in most markets, and the latest PMI survey indicators point to continuing contraction in demand.

Demand in US is also lacklustre although some economic data, and the latest PMI survey, indicate that demand should be improving. However, the major issue is the continuing high rate of production, with new capacity replacing any cutbacks by established producers, although these cuts have been very limited. The recent Q3 flat products price rise probably failed due to over-supply.

However, in Asia, the social housing programme in China should continue to absorb substantial volumes of long products, though this may conceal shortfalls in demand in other sectors. The automotive industry may improve next year, but this would only have a small effect on steel consumption. Most Asian economies will perhaps not be as firm as in recent years for their usually strongest quarter - Q4 - running through until Chinese New Year.

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Global Overview Pg 4

Coil Regional Review Pg 6

Long Product Review Pg 8

Plate Review Pg 9

Scrap Review Pg 10 Global Overview of Production Pg 11

The key question is whether production cutbacks in Q4 in US and Europe are sufficient to match real demand until year-end, when consumption may improve to allow producers to achieve price increases.

THE OUTLOOK FOR FLATS IS FOR PRICES TO CONSOLIDATE IN US IN NOVEMBER, BUT THEN INCREASE. EUROPEAN FLATS SHOULD HOLD, BUT MAY ONLY RISE SLIGHTLY IF THERE IS IMPROVED DEMAND IN Q1. ASIAN FLATS COULD RISE SLOWLY IN THE REST OF Q4 AND EARLY 2011. LONG PRODUCT PRICING COULD ALSO REBOUND SLIGHTLY IN ASIA, BUT WILL WEAKEN IN EUROPE AND US IF SCRAP CONTINUES TO FALL.

Market Sentiment Survey

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For more details visit www.steelbb.com or call +44 20 7645 9400 Source: The Steel Index

Nov `11

SBB Global Market Outlook ► Spot iron ore prices continued to fall dramatically during October, dropping 40%

since early September, before turning upwards on the last day. This rebound is likely to continue during November at a similar pace to the decline, but may then settle at a lower level than had been prevailing during the summer months. A price correction had been overdue, but the size of the fall was too far and too fast. Coking coal spot prices have also fallen sharply, but not so far and are likely to weaken further until the new year.

Scrap pricing has dropped slightly in most regions after holding firm during the summer months, and this weakness may continue until collection slows sharply at the end of the year. All these raw material cost changes will help mills with their profitability, but may harm market sentiment in the short term.

The likely scenarios for the next three months are:

• Prices for US flats should hold steady after falling regularly during October, as some mills announced new increases for November. This price rise is unlikely to stick unless demand improves or output is cut back, but a later attempt in December may be more successful. Raw material costs are weaker, with scrap prices finally falling, which gives producers improved profitability.

• Producers of flat products in Europe saw spot prices continually slip during October and levels may drop further, but should eventually consolidate towards the end of the year. Buyers will be waiting for the mills’ next price announcement, which may be for the start of Q1, but is likely to be modest. There is likely to be an improvement in demand in the first quarter, but end-user demand in Q1 next year will be lower than in the first half of this year. Stockholders are unlikely to restock significantly, unless there is some buying ahead of any increases.

• Asian demand continues to be fair and offtake should hold up during Q4, but sentiment has been weak during October and this may continue. Price levels in SE Asia are likely to stabilise or possibly slip slightly in the coming weeks. Prices had dropped sharply, dragged down by falling iron ore and scrap raw materials costs and poor sentiment.

• Domestically in China, prices fell during October and could be steady in November as producers seek unchanged prices this month while hoping that demand returns.

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“This rebound is likely to continue during November at a similar pace to the decline, but may then settle at a lower level than had been prevailing during the summer months”

“This price rise is unlikely to stick unless demand improves or output is cut back, but a later attempt in December may be more successful”

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Nov `11

SBB Global Market Outlook ► •

Long products’ pricing has weakened slightly in October in Europe, but producers in US have achieved a small increase. Prices are likely to weaken in the coming months, especially as scrap levels are falling.

• Asian long products, scrap and billet prices have fallen sharply during October, after a steady third quarter. Pricing could move slowly upwards if demand improves from November onwards.

• Spot iron ore prices in China dropped sharply during October as mills in China stayed out of the market as sentiment turned strongly downwards. Prices are likely to rebound upwards almost as quickly, as demand for restocking should return, while Indian material availability remains limited.

• Scrap prices have fallen slowly in Europe and US, and more sharply in Asia, during October and could remain lower in the next few months until collection slows down, though mills’ demand may also drop. Turkish scrap prices have also fallen, but better demand based on growing export sales could lead to higher scrap price levels later in November.

In China, daily output decreased slightly in September, but October’s production may fall further, which may bring annual output to just below 700 million tonnes for 2011.

Output typically grows in the following two months, and some of the blast furnace maintenance periods may then be over. Demand has been weaker than expected in October, but could increase in the seasonally-strong months of November and December. Exports volumes could increase further if output levels exceed domestic demand.

Total global crude output in September fell by almost one million tonnes from August’s monthly figure, which meant a rise of almost 3% in the daily rate. China’s production fell to 56.7 million tonnes. Actual output rose in Europe and Other Europe, while daily rates rose in CIS and North America. Asian output was steady on a daily basis but Japan and South Korea’s actual production were almost unchanged. India’s monthly production was estimated at 5.9 million tonnes. European production rose sharply by over 1 million tonnes, with most of the increase in France, Italy and Spain after the summer holidays.

During October, spot prices of 63% iron ore into China moved dramatically downwards until the last day of the month, ending around US$ 125/dmt cfr China as mills stayed out of the market while many cargoes were looking for buyers. Prices should rebound strongly during November as buyers must restock, possibly purchasing for higher output for the rest of the year. Indian availability is still likely to remain restricted, though the improved pricing will be more attractive to their suppliers.

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“Asian long products, scrap and billet prices have fallen sharply during October, after a steady third quarter. Pricing could move slowly upwards if demand improves from November onwards”

“Total global crude output in September fell by almost one million tonnes from August’s monthly figure, which meant a rise of almost 3% in the daily rate.

China’s production fell to 56.7 million tonnes”

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Nov `11

SBB Global Market Outlook ► The Q4 “mini-benchmark” price for iron ore contracts for the October-December quarter, where based on the previous quarter’s average index price lagged by one month, remained high at around US$ 175/dmt. The spot price during October fell far below this Q4 contract price, and many customers renegotiated prices. Miners generally accepted the moves to monthly or spot pricing, and this basis will be used in future, which means the end of the quarterly index pricing for them in many cases.

Scrap prices fell steadily in October in US, Europe and Asia, which may be an overdue correction as prices had not fallen during the summer as usual. Turkey’s import demand has reflected slower export activity for its long products, but volumes could now increase. Weaker demand by mills could mean that scrap prices will initially remain lower until collection rates drop.

Looking further ahead to the first quarter of 2012, it is likely that producers in Europe will be trying to increase prices if demand is strong enough. US producers will be trying to achieve further rises if their increases of late Q4 have been successful.

In Asia, producers will try to regain recent price levels after the current weakness, but there will need to be improved demand and matching production levels. These increases could be achieved in the run-up to Chinese New Year. However, inventories will be reduced at this time, so further price increases will depend on sentiment when buyers return after the holiday.

“Miners generally accepted the moves to monthly or spot pricing, and this basis will be used in future, which means the end of the quarterly index pricing for them in many cases”

GLOBAL OVERVIEW US HR coil spot prices continued to move downwards during October, until several producers announced a US$ 40/short ton increase. It is unclear whether spot prices will rise, but they may now stop falling. The full increase is unlikely to be achieved unless it is supported by other mills, which may take until December. There are signs of improving economic activity in US and end-user demand could pick up in the next few months. However, production plus imports are still likely to exceed apparent demand until Q1. Consumption for flat products in European markets is likely to continue to weaken for the next two months, and prices will slip before rebounding upwards. Prices have fallen sharply for coil in Asia. Demand has continued to be fair, and it should not fall further as Q4 is the strongest quarter. Long products offtake will begin to slow in Europe and US, but production levels Graph 1 should continue to be restrained, and prices will slip, especially if scrap HR Coil US$/t levels drop. Longs demand in Asia should remain steady, and rebar prices could stabilise until Chinese New Year, with raw materials costs also recovering.

Spot prices of CR and HDGalvanised coils in US have also fallen during October, in some cases more quickly than HR coils. There has been some destocking after the earlier price increases failed, so apparent demand may be better in the coming months making further price rises more likely, eventually. End-user demand may slowly improve and supply-chain stock levels could be topped up. Production

“Consumption for flat products in European markets is likely to continue to weaken for the next two months, and prices will slip before rebounding upwards”

“Long products offtake will begin to slow in Europe and US, but production levels should continue to be restrained”

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Nov `11

SBB Global Market Outlook ► has continued to be strong, with recent start-ups adding to the current output and few signs of cutbacks.

European flats producers saw spot prices slip slowly during October. Apparent demand has been weak and stock levels are not thought to have been reduced as quickly as buyers would like. Mills’ new price aspirations for Q1 are likely to be modest, but any announcement should stop the falls and turn the market slowly upwards. Output in Europe in September rose sharply above recent monthly levels, but this was mostly due to mill returns after the summer Graph 2 shutdowns. There have recently been some announcements of mill closures for European Coil Euro/t Ex-works the coming few months in Europe.

HR, CR and HDG coil prices have also moved slightly downwards in southern Europe during October as demand remained poor while output continued at a higher level. Prices are likely to weaken further as offtake will reduce until the new year, even if production is restrained. Import volumes have now begun to fall, as offer prices and leadtimes have been less competitive against domestic levels.

For buyers in South East Asia, coil prices have fallen sharply during October, but are likely to be steady during Q4.

Chinese export availability has increased while domestic demand has weakened and export prices have dropped during October, to retain competitiveness in regional markets. Volumes may increase further in the rest of the year if Chinese production exceeds domestic demand.

“Mills’ new price aspirations for Q1 are likely to be modest, but any announcement should stop the falls and turn the market slowly upwards”

“For buyers in South East Asia, coil prices have fallen sharply during October, but are likely to be steady during Q4”

Domestic HR coil spot prices in China fell sharply during most of October, as buyers’ sentiment turned downwards amid greater economic worries, but price levels steadied at the end of the month. Key mills are keeping their November prices unchanged to try to keep the market stable, but the spot market could still fall if demand does not improve. Real demand should grow as this is the strong quarter, though it is likely that the flats market will not be as robust as for long products.

Graph 3

Rebar $/t

Long products demand in the mature economies will begin to ease due to seasonal changes. Problems in their construction industries continued over the summer, but producers appear to have matched the actual activity levels, and there may be only a slight fall in demand during the next few months.

Prices in Europe have remained firm while US prices have risen during October, but both are expected to fall as scrap prices drop. Demand in Asia has been fair, but sentiment has fallen and price levels dropped sharply during October.

“Prices in Europe have remained firm while US prices have risen during October, but both are expected to fall as scrap prices drop”

Prices of CIS and Turkish billet slipped back during October, as demand in nearby markets and Middle East ►

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Nov `11

SBB Global Market Outlook ► remained steady, but Asian billet prices dropped. CIS long products prices were also weaker as export demand fell.

Prices for medium and heavy sections in Europe in October have slipped slightly and could continue in November. US mills have kept WF Beams transaction prices unchanged in October, but they are likely to reduce levels in November as scrap prices fall. Imported price levels for H-Beams into Asia fell in October, and are expected to drop further in the next month.

In US, there has been steady end-user demand for longs during the summer, but stock levels are high for the time of year. Rebar prices have been raised in October, but will be partially reduced in November if scrap pricing weakens. Wire rod prices decreased sharply in October, and may drop further in the next few months as end-user demand weakens and until imports are reduced.

In Asia, rebar prices were sharply lower during October as demand was fair, but sentiment was affected by the continuing economic problems. Wire rod and merchant bars prices also slipped. Offer prices for most long products in SE Asia are expected to weaken in November, especially if CIS origin longs prices continue to fall. Demand in Asia should remain steady during this quarter, which ought to support price levels.

Domestic prices of long products in China dropped sharply in October, before stabilising later in the month. They are likely to hold steady in November as demand should rise during the strong quarter. Sentiment in the construction industry is still fair as the social house-building programme continues, but there will be some slowdown next year.

In Europe, rebar has slipped slightly while wire rod prices were steady during October, as producers matched the real level of demand. Both products prices are likely to slowly decrease in November as real demand eases and raw materials costs will be weaker.

Commodity plate prices fell slightly during October in northern Europe, while levels in the south also dropped more sharply. US plate producers saw spot prices decrease during October as weaker demand finally took effect. In SE Asia, import prices dropped sharply, while export prices for Chinese plate fell by a similar amount.

Demand, which had been weaker than expected due to poor sentiment, should begin to improve and these price levels may stabilise.

Graph 4

COIL REGIONAL REVIEW

Oct

Nov*

19602100 40804500

19602100 41304150

China export FOB $/t

650-660

650-660

E. Asia import CFR $/t

620-730

610-640

Eur import CIF S.Eur pt €/t

490-560

480-520

68-68

63-63

Middle East imp CFR $/t

640-750

630-700

N.America dom FOB $/s.ton

620-690

620-660

N.Euro dom Ex-Works €/t

485-545

485-535

Rus Blk Sea export FOB $/t

640-690

620-650

S.Euro dom Ex-Works €/t

500-540

470-510

Ukr Blk Sea export FOB $/t

610-650

600-610

Oct

Nov*

25602700 51705450

25602700 51705270

China export FOB $/t

720-730

700-710

E. Asia import CFR $/t

730-780

710-750

Eur import CIF S.Eur pt €/t

560-630

550-600

N.America dom FOB $/s.ton

740-800

720-770

N.Euro dom Ex-Works €/t

560-625

540-612

Rus Blk Sea export FOB $/t

740-770

730-740

S.Euro dom Ex-Works €/t

580-620

550-600

Ukr Blk Sea export FOB $/t

730-750

720-740

Products (HRC) Brazil dom. Del. BRL/t China dom. Shanghai RMB/t

Jap dom FOT ¥/kg

Products (CRC) Brazil dom. Del. BRL/t China dom. Shanghai RMB/t

Products (HDG)

Oct

Nov*

52005250

52005250

China export FOB $/t

800-810

800-810

E. Asia import CFR $/t

830-880

820-870

Eur import CIF S.Eur pt €/t

635-655

610-640

Mid E. import CFR $/t

850– 950 850-900

N.America dom FOB $/s.ton

770– 850 760-830

N.Europe dom Ex-Works €/t

560-610

550-580

S.Europe dom Ex-Works €/t

590-650

540-620

China dom. Shanghai RMB/t

HRC $/t Flat products spot prices in US have fallen during October after turning downwards earlier in September.

Some producers have announced a new increase, but the full rise is unlikely to be achieved immediately.

Prices have fallen sharply in South East Asia, but could now stabilise for the rest of Q4. Producers in northern Europe are likely to announce new coil prices from the start of Q1, which should eventually halt the declines and then stabilise spot pricing. Southern European coil prices have continued slipping ► downwards and are likely to fall

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Coil Price Outlook

*Prices listed are SBB forecasts

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Nov `11

SBB Global Market Outlook ► further as demand remains poor. Chinese export prices of HR coil fell sharply in October but may stabilise if import prices in regional markets are steady.

Prices of HR coil in USA fell to US$ 620-660/st (US$ 683-727/t) at the end of the month. Apparent demand had been pulled forward in September so offtake may continue to be lower during Q4. Prices should stabilise initially before increasing in the next few months. Inventory levels in US had not been run down and are likely to become too high again as prices rise. CR Coil prices were also lower at US$ 740-770/ st (US$ 816-849/t) at the end of October, and should stabilise in November. HD Galvanised coil prices were also down by US$ 30/s. ton to US$ 770-830/st (US$ 849915/t), and look likely to be steady in November.

Flat producers in northern Europe saw spot prices move slightly downwards during October. Prices may weaken further or be stable in November but may firm when mills announce new prices for Q1. Real demand is unlikely to improve in the next two months, but should slowly gain which will support some price increases.

Longs Price Outlook Products (Debar/Rebar)

Oct

Nov*

Turkey export FOB $/t

650-720 640-660

Blk sea export FOB $/t

640-720 640-660

E. Asia import CFR $/t

630-720 630-650

China dom. Shanghai RMB/t

41904430

41604200

HR Coil prices in northern Europe were down to Eur 485-530/t (US$ 662-723/t) at the end of October. CR Coils prices eased slightly to Eur 560-600/t (US$ 764-819/t). HD Galvanised products base prices were more stable at Eur 560-610/t (US$ 764-833/t).

Eur dom del €/t

530-599 530-590

Eur import CIF S.Eur pt €/t

560-570 540-560

Southern European coil prices have continued to be weaker as HR coil prices dropped

by Eur 10/t during the month and are likely to fall further as demand will drop in the rest of the year. HR coil prices are now at Eur 500-535/t (US$ 683-730/t), while CR coil prices are Eur 580-620/t (US$ 792-846/t). HDGalvanised coil base prices were almost unchanged at Eur 590-630/t (US$ 805-860/t) at the end of October.

Mid E. import CFR $/t

670-710 660-680

N.America dom FOB $/s.ton

730-770 750-770

South East Asian HR coil prices were sharply lower during October at US$ 620-640/ tonne cfr. CR coil prices in SE Asia fell heavily in October, but may hold steady in November. CR coil prices were down to US$ 730-780/t cfr during October while HDGalvanised coil prices decreased to US$ 830-880/t.

Chinese HR Coil export offers dropped by US$ 50/t to US$ 650-660/t fob at the end of October, and should stabilise in the next three months if demand from regional markets improves. Domestic Chinese prices dropped sharply during October, but sentiment should be firmer in November. There could be some price gains during Q4 if demand for flat products improves after being weak for the past few months.

Jap dom FOT ¥/kg

Products (Beams / Sections)

Wire Rod $/t

REGIONAL

In US, longs producers increased prices by US$ 20/s.ton for rebar during October but are expected to post a decrease in November as scrap prices dropped. Long products prices in Europe have slipped slightly since the start of October, due to weakening demand as the seasonal downturn began, and are likely to slip further.

Prices in Asia were sharply lower, but demand should now improve during the rest of Q4. If scrap prices stabilise, this may help strengthen finished product prices in Asia. In China, demand for social housing construction remains strong, so domestic prices are likely to ►

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Nov*

840-860 830-850

Eur dom del €/t

615-665 610-660

Jap dom FOT ¥/kg N.America dom FOB $/s.ton

79-79

74-74

840-850 840-850

Products (Merchant Bar)

Oct

Nov*

China dom. Shanghai RMB/t

47004730

44004500

E Asia import CFR $/t

740-760 720-740

Eur dom del €/t

575-635 570-610

N.America dom FOB $/s.ton

860-890 860-890

Blk sea export FOB $/t

LONG PRODUCTS REVIEW

Oct

55-55

E Asia import CFR $/t

Products (Wire Rod)

Graph 5

60-60

China dom. Shanghai RMB/t

Oct

Nov*

680-745 675-685 43504400

44004400

E Asia import CFR $/t

700-740 700-720

Eur dom del €/t

540-570 540-570

Eur import CIF S.Eur pt €/t

570-590 550-570

Jap dom FOT ¥/kg N.America dom FOB $/s.ton

76-76

71-71

760-830 740-790

*Prices listed are SBB forecasts

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Nov `11

SBB Global Market Outlook ► stabilise or possibly move upwards after they dropped in the first half of October.

Medium sections prices in Europe were almost unchanged during October, and they may slip during this month. Rebar prices eased slightly to Eur 530-590/t (US$ 723805/t) at the end of October, and could slip further in November. Wire rod prices were steady during October at Eur 540-570/t (US$ 737-778/t) and producers will be looking to maintain stability in November and December.

Wire rod producers in US dropped their prices sharply by US$ 40/s.ton during October to US$ 760-790/st (US$ 838-871/t), and should be looking to maintain these levels later in Q4 as imports slacken.

Rebars in US have increased to US$ 750-770/st (US$ 827-849/t), but are likely to fall slightly in November if scrap falls and demand weakens. Producers of WF Beams in USA held their price levels steady at US$ 840-850/st (US$ 926-937/t), but prices are likely to weaken in November if scrap levels drop.

Import prices for rebar into SE Asia dropped sharply by US$ 50/t during October to US$ 630-650/t cfr, but may remain steady or increase slightly during November.

Merchant bars fell US$ 20/t during October. Wire rod prices also decreased by US$ 30/t during October to US$ 700-740/t cfr. Imported H Beam prices fell and were at US$ 840-860/t at the end of October.

“Wire rod prices were steady during October at Eur 540570/t (US$ 737-778/ t) and producers will be looking to maintain stability in November and December”

CIS billet prices dropped US$ 10-20/t in the second half of October to US$ 580-600/t fob, and they are expected to fall again in November. Delivered prices in SE Asia dropped slightly to US$ 630-640/t cfr. It is likely that billet prices will decrease further even if demand improves in Asia in the next few months, as there are still problems in the MENA region.

COMMODITY PLATE REVIEW

Plate Price Outlook Graph 6

Plate $/t

Commodity plate prices in northern Europe have slipped back during October, and are currently at Eur 648-710/t (US$ 885-969/t). End-user demand has been fair, but destocking by stockholders has continued since the summer shutdowns and is likely to remain slow until the new year. Prices in ► southern Europe have also fallen during October, as the construction industry’s woes remained. Prices in both European regions are expected to fall sharply in the coming few months unless production is reduced to match actual demand.

Prices of plate in USA have dropped

by US$ 20/st during October to US$ 940-960/st (US$ 1036-1058/t).

Prices are expected to continue to slip further before possibly rebounding together with coil price levels, if those increases are successful. However, the fall in plate prices has been much smaller than it has been for coils, but demand is likely to weaken until early next year.

Oct

Nov*

43504480

42804400

700-800

670-730

N.Europe dom Ex-Works €/t 648-710

610-660

S.Europe dom Ex-Works €/t 570-650

570-620

Eur import CIF S.Eur pt €/t

550-640

550-600

E. Asia import CFR $/t

660-730

620-640

Products China dom. Shanghai RMB/ t

CIS export FOB $/t

N.America dom FOB $/s.ton 940– 980 940-960

China export FOB $/t

665-670

640-650

*Prices listed are SBB forecasts

Plate prices in SE Asia have fallen sharply during October even though demand remained fair, and consumption may now increase. Chinese export prices have also

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Nov `11

SBB Global Market Outlook ► dropped by a similar amount, so as to stay competitive in the regional market.

Prices are now down to US$ 665-670/t cfr for commodity plate, and may remain steady or firm slightly in November if Asian demand improves. CIS plate prices decreased to US$ 700-740/t fob during October as demand fell in most of their export markets, and levels are expected to drop further in November.

SCRAP AND RAW MATERIALS REVIEW Graph 7

Scrap US$/t

Most US scrap prices slipped slightly during October, though levels were supported by strong export demand.

Prices are likely to fall in November.

Prices were weaker in Asia during the month. European scrap prices also fell during October, and export prices dropped slightly in US dollar terms.

Most prices look likely to weaken during November if demand falls as output is cut, but material availability typically also begins to slow in this quarter. Prices for imports into Turkey slipped during October but may increase if buyers return to the market and their finished steel export business improves.

Domestic shredded scrap prices in USA slipped by US$ 10/lt to US$ 445450/lt during October. No 1 Bundles and Bushelling were also lower at US$ 500-525/lt.

US prices are expected to slip in November as export demand and prices decline.

Scrap prices in Asia fell US$ 45/t in October to US$ 430-440/t cfr. Further decreases are likely in November as demand may weaken, unless Asian mills raise their production. However, the rebound in iron ore prices may lend support to scrap levels.

European price levels also ended the month slightly lower with southern European domestic shredded scrap at Eur 290-320/t delivered (US$ 396-437/t), while northern levels were more stable at Eur 5/t higher. European export prices fell in October in dollar terms to US$ 390-400/t fob while Graph 8 Turkish import levels dropped by US$ Iron Ore & Coking Coal US$/t 15/t during the month. They are expected to be slightly stronger in November if overseas demand for finished products improves.

Spot prices of Indian origin iron ore 63% material dropped sharply before turning upwards on the last day of October to finish at US$ 125-126/t cfr China, a fall of US$ 50/dmt. Chinese buyers had stayed out of the market as sentiment turned negative. Prices were then chased downwards when cancelled contract tonnages reappeared as spot cargoes, but the fall was too steep and sentiment has since changed. Prices should now rise sharply during this month, as Chinese restocking ►

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“Most prices look likely to weaken during November if demand falls as output is cut, but material availability typically also begins to slow in this quarter”

“Further decreases are likely in November as demand may weaken, unless Asian mills raise their production.

However, the rebound in iron ore prices may lend support to scrap levels”

“Prices were then chased downwards when cancelled contract tonnages reappeared as spot cargoes, but the fall was too steep and sentiment has since changed”

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Nov `11

SBB Global Market Outlook continues while Indian availability will remain ► poor due to bureaucratic and legal delays, as well as the low current price levels.

The October-December quarter iron ore contract price was calculated at almost US$ 174.00/dmt but, as spot prices plunged below this level, buyers demanded a revised pricing basis. Miners agreed to move to monthly index-based or spot pricing for them, and this will now be their pricing basis going forward. Several major miners had been offering these terms for some time, but they will now be more widely available across the marketplace.

The spot price for coking coal has also been falling sharply in recent months and is well below current contract levels. The spot price was down to US$ 260-270/t fob Australia at the end of October, and is likely to fall further in November.

GLOBAL OVERVIEW OF PRODUCTION The monthly production figures from World Steel Association show that September’s global production decreased by almost one million tonnes compared to August.

However, as September is a shorter month, there was a 2.8% increase on a daily basis in this month. Chinese production fell by 3.5%, which is a small fall on a daily basis.

Actual production was significantly higher in Europe and Other Europe, but almost stable on a daily basis in other regions.

Crude Steel Output (thousand tonnes) Jul 2011

Aug 2011

Sep 2011

Europe

27,295

25,103

27,479

- EU 27

14,947

12,616

14,971

- Other Europe

3,070

3,035

3,218

- CIS

9,278

9,452

9,290

N America

10,094

10,218

9,945

- USA

7,368

7,438

7,190

S America

4,284

4,123

3,945

Africa

1,207

1,200

1,103

Middle East

1,587

1,677

1,661

Asia

82,179

81,251

78,809

- China

59,300

58,752

56,700

616

668

626

127,240

124,241

123,567

Oceania World Total

Total world production in September was 123.6 million tonnes, which is 9.7% higher than September 2010 and is just below 1.5 billion tonnes on an annualised basis. Global production in the first nine months of 2011 was 1133.8 million tonnes, an 8.2% increase on 2010’s 9-month figure. China’s monthly output was 16.5% above that in September 2010.

Production in EU27 increased by 4.4% compared to output a year ago, despite dropping over a million tonnes since May, while output in North America was 8.3% higher. Production in South Korea and Taiwan rose by 17% and 12% respectively compared with a year earlier.

EU 27’s production was 15 million tonnes in September, which was more than 18% above August’s level, after the summer holiday period finished. Italy’s output increased by 84% from August’s level, while France and Spain’s production rose by 27% and 24% respectively. Germany produced almost the same as in August, despite the shorter month.

Source: WSA

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SBB Global Market Outlook ► In Other Europe, Turkey’s monthly output increased by around 7%, and is effectively

3 million tonnes. The actual total CIS output was almost 2% below August’s level at 9.3 million tonnes.

USA’s production was more than 3% lower than in August. South American output was 3.9% lower compared to the previous month’s levels, as Brazilian production dropped to 2.8 million tonnes.

China’s output of 56.7 million tonnes was 3.3% lower than in August, but a steady daily rate. India’s monthly output was estimated to be stable on a daily basis. Japan’s actual production was almost unchanged in September at 8.9 million tonnes, while South Korean output was almost steady at 5.5 million tonnes.

The Asian countries’ total production of 78.8 million tonnes was a fall of 3% from August, and a gain of 12.9% from September 2010. This region accounts for 63.8% of global production based on September’s figures.

World output excluding China was 66.9 million tonnes in September, up from 65.5 million tonnes in August, and sharply higher than 64 million tonnes in September 2010.

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