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Steel bar and pipe prices to rise in Q4

But GI sheets should become cheaper

PRICES of steel bars and pipes are expected to increase in the fourth quarter due to a projected rise in demand but prices of steel sheets may dip as the demand for these continue to weaken, industry leaders separately said.

Demand for steel bars and pipes is expected to surge back in the last quarter.

Steel bars and pipes are typically used for roads and building reinforcement while sheets are used as roofing material.

Alexander Wang Ariza, chairman of TKC steel subsidiary Zhangzhou Stronghold Steel Works Co. Ltd., said in an interview late last week he expects the current slump in demand for steel bars and pipes to turn around by the fourth quarter.

"The current slowdown [in steel demand] is seasonal. The monsoons deter construction. China needed to stop factory [production] and halt construction to meet [air quality] standards. August was vacation time in Europe, and now it’s Ramadan in Muslim countries," Mr. Ariza said.

"But the general belief is, when these are over, demand will pick up in the fourth quarter. Prices should increase as well," he added, but declined to go into detail.

Data from the Metro Manila arm of the Trade department show that a 6-meter steel bar measuring 10mm across costs P235 last week while a 12mm bar costs P350. Prices remained constant from the past month.

On the other hand, Philippine Iron and Steel Institute Executive Director Arthur M. Florendo said that demand for flat steel products such as galvanized iron (GI) sheets and pre-painted roofing materials will continue to decline in the fourth quarter. As such, he expects a 3% to 5% dip in the prices of these items.

"If you go by the seasonality of the industry, demand will [continue] to soften...Construction is not the priority during that time...There may be some pockets of growth, probably in Metro Manila, but in general, I don’t see a significant growth [in demand]," Mr. Florendo, who is also the president of steel sheets manufacturer Union Galvasteel Corp., said in an interview.

Corrugated GI sheets measuring 0.4mm sold in Metro Manila cost P56 per foot last week, according to the Trade department. A 3% to 5% decrease would mean a cut of around P1.68 to P2.80 in prices.

Mr. Florendo said demand for these materials had declined as consumers were put off by the previously high prices in the first two quarters.

"We’ve seen in the past months a negative to flat growth in demand because prices were too high...We were forced to accept raw material prices that were close to 70% higher than prices last year...The industry had to pass on a portion of the price increases," he said.

However, if the global economy recovers by 2009 and countries increase their demand and make iron ore and other raw materials more expensive, prices for steel sheets may rise, Mr. Florendo added.

"We get our raw materials from Taiwan, Australia, Japan. If ever the steel mills [abroad] feel that their domestic consumption is increasing, especially for their automotives [sector], they will cut their exports to us," he said. "In 2009, if the US recovers, I think it will have a big effect on global supply and prices of raw materials."

The implementation of government projects next year — the housing for soldiers and teachers, for instance — are also expected to prop up the demand for steel sheets.

"We’re looking at [supplying for] more school buildings and mass housing," Mr. Florendo said.

Meanwhile, Mr. Ariza said that they are on the lookout for export destinations for next year.

"We’re talking to a couple of buyers from the Middle Eastern, South Asian, and Southeast Asian markets," he said, noting that an export order will typically require a miniumum of 5,000 to 10,000 metric tons.

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