Steel demand pick up seen sluggish at best in 2009

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

30 Apr 2009

Any revival in demand for steel late this year will be sluggish at best and may not become strong until 2012, analysts told a scrap metal conference. "Price falls and producer margins are seen coming under increasing pressure around mid-year," Gavin Montgomery, steel analyst for CRU in London told the Institute for Scrap Recycling Industries (ISRI) convention.
"Conditions could become so severe that we could see permanent removal of steel making capacity in some higher cost areas."
CRU expected global demand for steel sheet products to fall by 22 percent in 2009 to 300 million tonnes from 380 million tonnes in 2008 and well off 2007 peak levels of 390 million.
Montgomery predicted that absolute consumption levels will not return to 2007 and 2008 levels until 2012, and in some markets not within CRU's 5-year forecast horizon.
"Any upturn in price will be limited as demand recovery is expected to be quite gradual and overcapacity is a problem throughout the industry," he said.
Chuck Bradford of Bradford Research Inc. forecast prolonged, sluggish growth beginning later in 2009 or next year.
He said he was looking for an inventory pick-up, or at least a lack of steel inventory reduction, over the next few months.
"You can't liquidate inventories forever," he told delegates.
Both analysts cited recent contracts for coking coal that settled 57 percent lower than last year and forecast world iron ore benchmark contracts would settle at levels around 40 to 44 percent lower than last year
Many U.S. steel companies will not benefit from the lower prices as they locked into multi-year deals at last year's higher levels.
Bradford called Ford's announcement that it will build 25 percent more cars in the second quarter because it had worked down inventories from 120 days to 80 days "one of the best signs of recovery."
He added, however, that it will take longer for General Motors to work off its substantial inventory overhang, which remained at 120 days worth of vehicles as of April 1.
He also said some steel service centers had worked down inventories, though their average shipping rates would likely remain closer to the slower pace in fourth quarter of 2008.
Though 30 percent of steel goes to construction and infrastructure building, also in decline, Bradford noted that government stimulus money should begin to take effect sometime in the second half and into next year, helping mini mills.

Source: Reuters