March 30, 2000

Up from USD 145/MT

Prices have started to stabilize after a precipitous drop in prices during the first quarter. Due to the increase in raw material prices that saw the price of steel billets move from USD145 CNF to USD175 CNF for a 20% increase since the first quarter of last year, pressure is building for steel bar manufacturers to raise their prices. In the Grade 33 market, heated competition in the past year caused prices to drop as low as less 27% based on the industry July 1, 1990 price list. However, as of today prices have recovered to less 8% from the same price list or a reversal of 19%.

In the Grade 40 and Grade 60 market, stiff price competition due to the diminished volume demand resulted in prices dropping to as low as 18%. However, prices have recently increased to less 10% for Grade 40 and less 14% for Grade 60 regardless of volume. In spite of limited demand, market prices have exhibited a general upward trend due to the cost-push pressure exerted by the poor performance of the peso vis-a-vis the dollar and the continuing billet price increases. At the moment most local and international billet suppliers are witholding price information in the hopes of another round of increase. In this light, it is not likely for billet prices to soften in the near term. Given such a situation, there is no recourse but for steel bar manufacturers to increase their prices if not to cobble together some semblance of a margin; at least, to minimize losses. It is a widespread consensus that the industry as a whole was bleeding profusely from the intense price competition of the first quarter and it is unlikely that they are willing to sustain such losses in the coming months.