Steelmakers Resume Output as Global Demand Recovers

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

31 Aug 2009

Steelmakers are resuming production at mills from China to Russia and the U.S. as the industry pulls out of its worst slump since World War II. OAO Novolipetsk Steel, Russia’s largest producer, raised its 2009 output forecast today, and Voestalpine AG, the biggest in Austria, ended shortened working hours and restarted a blast furnace. China Oriental Group Co., which counts ArcelorMittal as its second-largest shareholder, said the local steel industry had recovered more quickly than previously expected.
The price of hot-rolled coil, a benchmark steel product, has rebounded 15 percent since March 31 after declining 55 percent in the previous three quarters, according to data supplied by Metal Bulletin. Steelmakers cut prices, output and staff numbers in the second half of 2008 as builders and automakers struggled to survive the world economic crisis.
“Demand will increase from here, but fairly slowly,” John Kovacs, an analyst at London-based metals consultant CRU Ltd., said today by phone. “The risk is whether too much capacity comes back to the market too soon, which may cause a ‘two steps forward, one step back’ type of recovery.”
Novolipetsk, based in Lipetsk, central Russia, today raised its output forecast for this year by 4 percent to 10.5 million metric tons because of improving demand and prices. Voestalpine restarted a furnace and ended short working hours at its Linz plant as demand for flat steel rebounded “significantly.”
Prices to Rise?
Tata Steel Ltd., the biggest Indian steelmaker, said Aug. 21 its Corus unit would reopen a mill in Wales. ArcelorMittal, the world’s biggest steelmaker, last month said it was restarting furnaces in Belgium, France and Spain. On July 28, U.S. Steel Corp. Chief Executive Officer John Surma said some plants were firing up again as orders improved.
China Oriental said today the Asian nation’s stimulus spending is driving construction demand for steel. The local steel industry has “recovered earlier and quicker than expected,” it said in a statement to the Hong Kong stock exchange. “The group expects steel demand will rise further in the second half,” it added.
Steel prices are set to rise in the second half as demand recovers, led by Chinese consumers, Paul Cliff, an analyst at Nomura Holdings Inc., wrote in a note on Aug. 18. Demand in China, the world’s biggest steel user, is “robust,” with the outlook for construction in the country remaining “strong,” Cliff said. Global demand is expected to increase 12.2 percent in 2010, after declining 10.3 percent in 2009, Nomura said.
Iron Ore
China’s monthly steel output reached records for three straight months this year, and prices have jumped 21 percent since the government announced a fiscal stimulus package in November. Baoshan Iron & Steel Co., China’s biggest steelmaker, has increased prices for three months since July.
The price of iron ore delivered to China, the world’s biggest buyer, has also climbed 26 percent this year to $98 a ton, according to data supplied by Metal Bulletin prices for the so-called 63.5 percent grade of material. Iron ore imports jumped 29 percent in the first half as steel mills expanded output, spurred by government spending programs.
Salzgitter AG, Germany’s second-largest steelmaker, said yesterday it would boost prices from Oct. 1.

Source: Bloomberg