May 09, 2001 

POOR MARKET OUTLOOK
(Political Instability Haunts Business)

After the peso appreciation to P47 to P48.50 range due to the initial euphoria of a peaceful change in government, the peso has again depreciated to P50.46 as of today exacerbated in no small part by another round of weakness in Asian currencies and the recent violent demonstrations.

The prices of import-dependent reinforcing steel bars should have risen in the wake of the peso depreciation. However, because of the noticeable slackening of demand, prices of reinforcing steel bars have remained stable or have generally softened. This is particularly felt in the Grade 40 and Grade 60 market. Due to the limited construction of high-rise projects and the lack of government funds to pursue large-scale infrastructure projects, the higher grade has continued to suffer from weak demand and a shrinking market. This has been worsened by overcapacity and cutthroat competition. At present prices are hovering at around less 16% from May 5, 2000 Price List.

In contrast, the Grade 33 market has enjoyed a significant price rise with prices now ranging between less 8% to less 10% from the May 5, 2000 Price List.

The Grade 33 market is more reflective of the general trend of rising prices due to rising costs of inputs. The only exception is the softening of billet prices-- the raw material input for the production of rebars. At present, prices for Black Sea origin billets are hovering at around USD175/mt from a high of USD182/mt over a month ago. Billets of Far East origin remain high at around USD187/mt. Poor demand from Asian countries such as Taiwan and, to some extent, China, with its subdued demand, will continue to put a lid on any upswing in billet prices in the near term.

The prospect for the local market will not fare any better. Although there has been a reduction in billet import prices, this has been more than offset by the depreciating peso. With the advent of the rainy season any price increase arising from higher costs will be termpered by weak demand.