The fall of prices for a number of finished steel products during the first half of this year was a surprise to many steel companies which had built their production plan for this year on the steel prices of the year 2004 which was considered a good year by all standards for the steel industry.
The profits made by the steel companies during 2004 have contributed to improving the steel image for the searcher for new investments. In different regions around the world, including the Arab region, the steel industry could attract new investors to enter into this industry.But what has happened of steel prices falling, or of prices instability, has created some fears either by some steel producers or by some investors who drew a beautiful picture of the steel industry, proceeding from the profits made by the steel companies as a result of the rising prices during 2004 and the year 2003.
Some people have found in the steel prices volatility and their downward trend an indicator to a cycle of a new price falling after the rising cycle which continued for almost one and a half years. But there are others who also see in the steel growing production worldwide, which created an overcapacity, a cause for the return of prices to go down faster than it had been expected. In order that the presence of such an overcapacity should not be a new justification for new price falling, some major steel producing companies, such as Mittal Steel and Arcelor and others have resorted to the policy of cutting production in order to support prices, or perhaps for other purposes, but this is what was announced by these companies..
It would be difficult to interpret the prices falling by one factor, as some people believe that China which pushed prices up in a past year is itself which is now pushing prices down, as over the past months China had shifted from being a steel importer into an exporter, even though it will, in effect, remain for several years as expected by many people, a net steel importer, which made the quantities existing in the world markets surpass the requirements of these markets.
The steel industry has been accustomed to the ups and downs state of prices. Signs of rising have loomed during the third quarter and early fourth quarter. There are some people who expect this rise to continue, which it will never reach to what prices were in 2004.
The situation of steel in the Arab region was not that far from the world trends even though it seemed clear that there was concentration on increasing the produced quantities which were justified by the increasing volume of the local demand irrespective of the prices downward trend.. The steel prices in most Arab markets took the downward trend during the first half of this year, then they came back to go up gradually in the third quarter. The more the rise of prices constituted, which for some peopleis considered, recovery of this industry of a new vividness, the more others see that it bears with it risks for the real estate investment which found in the prices falling a good opportunity for a new recovery. The return of prices to rise means a new return of vividness to this industry after it had lost it due to the prices shake-up, which weakened the glittering of brilliant image of the steel industry embodied by the achievement of this industry of a production figure for the first time exceeding one billion tons in 2004.This figure is expected to continue as such in 2005. This brilliant image has also been embodied in the achievement of most steel companies of profits which were the highest prices in the history of this industry.
The difference in the steel prices between one region and another has unveiled during the past period of this year the fact that when the steel prices rise, they rise in all regions, but when they fall, they will be subjected to considerations determined by  the factors of the market in every individual region, namely, pricing is necessarily no longer international but it is subject to the supply and demand conditions in every region. This explains that the difference in prices has reached about 100 dollars between one region and another this year for the hot-rolled coils, and, maybe, for other products, too.
It would be logical for the inputs rising costs this year, such as the rising prices of iron ore and scrap, the prices of alloy materials and the freight rates, to lead to the rising prices of the finished steel products, but what happened of fall in the prices of the finished products has given an image contradicting with what had been expected. This means that steel pricing is subjected to different considerations which are not necessarily determined only in the inputs rising costs, which makes determination of prices subject to the supply and demand in every individual region, taking into consideration the other common factors which affect determination of prices.
The real steel price, in spite of the rise which took place in a past year, as referred to by many analyses, remains lower than it had been in the 1970s, especially if we consider the inflation rates which took place during this period compared to what they had been before.
However, this does not mean that we should ignore the contradicting impacts of the prices rise, because the more the price rising contributes to improvement of the steel image for the investors and also for the steel producing companies, the more this rise will result in difficulties for many sectors using these products, particularly the real estates market.
If the oil rising price has strongly pushed thinking over finding new energy sources, the alternative for steel is the steel itself in spite of the presence of rival products which could assert their presence. This means that concentration on development and modernization inside the industry itself, may lead to creating products of lower costs, respectively reducing prices so that the steel industry will be more capable to adapt itself to the supply and demand conditions and be more responsive to the changing market conditions.

ARAB STEEL