Global steel industry awaits China, US auto turnaround
Monday, 13 April 2009
PARIS, Apr 12 (AFP): Steel is on edge and the global industry is cutting back hard, hanging on for either a budget blast from China, new credit for vast Middle Eastern building schemes or resurrection of the US auto industry.
Demand has dwindled and steelmakers, notably the giant of them all, ArcelorMittal, are damping down surplus furnace capacity while waiting for credit to flow, construction cranes to turn and factories to roll.
A decision by ArcelorMittal last week to pursue temporary production cutbacks, slashing European output by more than half from the end of April according to a union source, dramatises the extraordinary ride and role of steel in the last few years.
In just months the global industry has gone from a boom driven largely by China, emerging markets and a property extravaganza in the Middle East to a narrow line between excess capacity and the costs of waiting for recovery.
"Over the past six months, demand for steel has dropped dramatically and, as a result, producers have been cutting production," analysts at Barclays Capital said in a study last week.
In another report, Morgan Stanley predicted "the current demand shock to lead to excess steel capacity."
Consequently, the bank said, steel plants should operate at rates below 75 per cent of capacity until 2012.
"The steel market is not very different from base metals as a whole, but steel has reacted more rapidly and dramatically since September," said commodities analyst Perrine Faye of London-based FastMarkets.
Demand has dwindled and steelmakers, notably the giant of them all, ArcelorMittal, are damping down surplus furnace capacity while waiting for credit to flow, construction cranes to turn and factories to roll.
A decision by ArcelorMittal last week to pursue temporary production cutbacks, slashing European output by more than half from the end of April according to a union source, dramatises the extraordinary ride and role of steel in the last few years.
In just months the global industry has gone from a boom driven largely by China, emerging markets and a property extravaganza in the Middle East to a narrow line between excess capacity and the costs of waiting for recovery.
"Over the past six months, demand for steel has dropped dramatically and, as a result, producers have been cutting production," analysts at Barclays Capital said in a study last week.
In another report, Morgan Stanley predicted "the current demand shock to lead to excess steel capacity."
Consequently, the bank said, steel plants should operate at rates below 75 per cent of capacity until 2012.
"The steel market is not very different from base metals as a whole, but steel has reacted more rapidly and dramatically since September," said commodities analyst Perrine Faye of London-based FastMarkets.