Real demand to help European steel pickup -Eurofer

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

31 Jan 2010

Rising real demand for steel, not just restocking after the crisis, will drive some sectors of the European steel market in 2010 and overall volumes should rise by some 5-10 percent, the president of steel body Eurofer said. Global crude steel output dropped 8 percent in 2009, in one of the worst downturns in its history, but analysts expect production to rise this year as the $500 billion industry slowly recovers.
"We do see some areas, like the automotive industry, and in the course of the year I think also the energy industry, should at least partly recover," Wolfgang Eder told Reuters in an interview on Friday.
"Then we would see some drivers in demand as well, so not just from the restocking and (recovery) from the poor situation but also from intensifying demand at least in some areas," said Eder, who has been president of the European body since October.
Eder, who is also the chief executive of Austrian steel group Voestalpine, said steel demand would likely stay stable in the automotive industry despite the end of government stimulus measures such as car scrapping schemes.
"For sure we will see some decline in the demand for smaller cars. On the other hand we see an upturn in the demand for the larger cars. There is a need in Europe to do some restocking.
"We think there is some pressure on the rental car companies but also car companies in general to do some replacement of the old fleets and this is one of the drivers of the improved situation in the upper class cars. I think that in total over the year this should at least compensate (for it)."
SEES NO CHINA RISK
Eder said Chinese and Indian imports would not pose a big problem for the European market in 2010.
He said Asian steelmakers would see in the longer term that they would lose a significant amount in transport costs if they tried to sell their product to the European market.
"Steel is sensitive to transport costs," Eder said. "I have a different opinion from many of my colleagues and I think that in the long-term China will learn this lesson."
"(Chinese steelmakers) are still fairly new in international business and you have to allow for a learning curve."
China strengthened its position as the world's top steel producer in 2009, with its production rising to a record high at 567.8 million tonnes. The 13.5 percent rise in its output last year means China now accounts for 46.5 percent of the world's total production.
Eder said he expected raw material prices to rise in 2010 said companies would need to pass on the costs to the market.
"The steel industry cannot afford, due to the current earnings situation, to take over the risk," he said.
He also urged European steelmakers to continue tackling overcapacity, despite progress at sites in Bulgaria and Britain.
"We still have 210 million tonnes of capacity and only need 170 maybe 175 million tonnes. We have 15 percent overcapacity. This will be a challenge for the next eight years."

Source: Reuters