At the beginning of 2010, lengthening lead times and low inventory levels combined to push up order levels from distributors to mills, which have responded by going into the raw material market. Consequently, this has pushed up prices quickly as supply has been constrained by low industrial output and seasonal collection factors. However, we remain cautious about underlying demand and as yet we see no reason to revise up our forecasts for automotive, appliance or construction demand. Higher coated output later in the quarter and into the second, along with the potential arrival of imports given high premiums over international levels, may deflate the bubble as quickly as it arose. Mills will cut back on raw material purchasing and as supply into that market eases, prices will fall again. Without underlying demand growing faster than expected, we do not see how this pricing rally can be sustained through Q2.
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