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NEW YORK (Scrap Monster): Bank of America Merrill Lynch forecast steel prices falling until 2015, with 2013 seeing a further 8% sliced off sale prices to $646/mt ex-works as raw material prices declined globally.

According to BofAML, steel prices will be weak over the medium-term, with hot-rolled coil in 2012 down 5% on the year to an annual average price of $670/mt ex-works North Europe.

"Acknowledging continued significant overcapacity in the steel industry globally, we believe steel mills are now running a tolling business. Hence, steel producers will have little to no ability to maintain steel prices in the face of lower raw material quotations," the bank noted.

Analysts at the bank had already included weaker economic growth in Europe when making their initial calculations, but Monday's downward revision comes on the back of declining industrial production as companies canvassed indicated "much weaker order momentum in Europe after the seasonal summer lull."

This prompted the bank to deepen its forecast for lower steel demand in 2012 to minus 3.8% from minus 2.2%.

"Our forecast of a slower rebound in steel demand is heavily influenced by the continued roll out of austerity measures that cap growth potential," said the bank.

"The growth outlook for premium autos looks to be softening. We see downside risk to volumes for ThyssenKrupp and Salzgitter as a result," BofAML said in a review of specific steel end-user sectors.