Benprise Blog

November 11, 2008
Abrupt Slowdown in Steel Industry
By David R. Butcher

In early 2008, global steel prices were at record highs. Since then, steel demand in the domestic U.S. market has been weak, affecting many users in a very severe way.

At the start of 2008, GFMS Metals Consulting had expected a rebound in stainless steel markets by midsummer. Not only has this not happened, but various steel mills and service centers indicate conditions in the global stainless steel sector have worsened since.

The slowdown was abrupt, “unlike anything we’ve seen,” the CEO of U.S. Steel told analysts last week.

Steel demand in the domestic United States market has been languid for most of the year, but the steel segment has been particularly volatile in the last six months.

“We are in a period of high economic uncertainty,” Ku-Taek Lee, chairman of the World Steel Association (formerly the International Iron and Steel Institute) and CEO of POSCO, said in a statement last month. “The impact on steel markets is becoming more apparent as we move into the later part of this year.

The CEO of a major steelmaker recently acknowledged that the fourth quarter of 2008 is being highlighted by “the volatile global economic climate” that has resulted in “softening demand and prices for flat-rolled products in North America and Europe.”

Since the end of June, many steel-buying companies have begun reducing purchases “on the back of weaker demand in their sectors,” according to a Financial Times report last month. “Much of this is linked to credit restrictions spreading into the economy.”

This has caused prices for many grades of steel to fall substantially of late. As demand has slowed along with the worldwide economy, steel prices globally have deteriorated.

Recently, steel producers in North America and other parts of the world have cut production to adjust to the lower order levels. In the last week of October, U.S. steel mills operated at only 67 percent of capacity, according to the American Iron and Steel Institute (AISI). That week’s production represents a 24.0 percent decrease from the same period in 2007.

“Within a matter of weeks, the revitalized U.S. steel industry has gone from record prices and profits to production levels reminiscent of the depths of the last recession,” the Pittsburgh Post-Gazette reported last week. (It is reported that global scrap metal prices that had recently soared to near-criminal heights have hit rock bottom, thanks to a faltering economy.) Many steelmakers, if not most, are expecting production will be off 20 percent to 25 percent in 2009, the Pittsburgh paper noted.

During September alone, steel product shipments from metals service centers in the U.S. continued to decline in year-over-year comparisons, the latest data from the Metals Service Center Institute (MSCI) show.

The MSCI reports:

September shipments of steel products from U.S. metals service centers totaled nearly 3.73 million tons, a decline of 7.6 percent from September 2007. U.S. shipments for the first nine months of the year totaled about 38.08 million tons, down 5.4 percent from a year ago.

Month-end inventories of steel products totaled 10.66 million tons, 0.9 percent more than a year ago, representing a 2.9-month supply, MSCI says.

While total and finished steel U.S. imports through the first nine months of 2008 are down from the same period last year by 7 percent and 8 percent, respectively, “the monthly average for finished steel imports in the most recent three-month period (July-September 2008) is up 5 percent versus the monthly average in the previous three months (April-June2008),” according to the AISI. Meanwhile, total and finished steel imports on an annualized basis this year are each down 3 percent from 2007.

In its October 2008 report on business conditions, the Precision Metalforming Association (PMA) determined that North American metalworking companies expect “a severe deterioration” in business conditions over the next three months. When asked what the trend in general economic activity will be during the next three months, metalformers anticipate a sharp decline:

* Sixty-seven percent of participants reported that activity will decline (up drastically from 31 percent in September);

* Twenty-six percent predict activity will remain unchanged (compared to 53 percent in September); and

* Only 7 percent forecast an improvement in business conditions (down from 16 percent in September).

PMA’s findings mark the lowest level of confidence since January 2001.

“Steel demand has gone AWOL, scrap costs have collapsed and steel prices have slipped,” Tom Stundza writes in Purchasing’s latest Steel Flash Report.

“There is little business being done by the steelmakers,” one analyst told clients last week. “Even a 4 percent decrease in the fourth quarter [gross domestic product (GDP)] does not equate to the nearly empty order books at some of the steelmakers.” (Source: Pittsburgh Post-Gazette)

Others are more optimistic. Lee, for instance, expects growth in steel demand next year and for the medium term, above the world GDP growth rate.

“We are seeing a slackening in demand. But there’s no reason to think it will be a catastrophe,” the Financial Times recently quoted the chief executive of Austria’s biggest steelmaker as having said. The exec projects world demand for steel will grow 4 percent to 4.5 percent next year. Growth last year was 6.6 percent; in 2006, it was 8.8 percent.

Resources

Producer Price Indexes – September 2008
Bureau of Labor Statistics, Oct. 15, 2008

Statement on Short Range Outlook (SRO)
The World Steel Association, Oct. 6, 2008

Steel Market Forecast Briefing: Prices Set Record Highs in All Markets
GFMS Metals Consulting, February 2008

World Scrap Metal Prices in Free Fall
SteelGuru.com, Nov. 6, 2008

US Steel Profit Triples but Company Sees Lower 4Q
by Mike Obel
The Associated Press, Oct. 28, 2008

Steel Outlook Falters as Demand Falls (registration required)
by Peter Marsh
Financial Times, Oct. 2, 2008

This Week’s Raw Steel Production
American Iron and Steel Institute, Nov. 3, 2008

Steel Industry Sags as it Sees Sudden Drop-off in Business
by Len Boselovic
Pittsburgh Post-Gazette, Nov. 5, 2008

Metals Activity Report: Steel, Aluminum Shipments Continue U.S., Canadian Decline
The Metals Service Center Institute, Oct. 20, 2008

Business Conditions Report: October 2008
The Precision Metalforming Association, Oct. 13, 2008

Purchasing’s Steel Flash Report
by Tom Stundza
PurchasingData.com, Oct. 31, 2008

Big Steel Groups Cast Out of ‘Paradise’ (registration required)
by Peter Marsh
Financial Times, Oct. 8, 2008

posted in:

* Home>
* Metal News,
* > Asia,
* > Posco to start steel plant construction without displacement

Posco – www.yourmetalnews.com
Posco to start steel plant construction without displacement
Tuesday, Nov 11, 2008

South Korean steel major Posco, which had sought 4,004 acres of land for setting up its 12-million tonne greenfield steel unit near Paradip, in Orissa, has decided to go ahead with construction without displacing anyone from its Rs52,000-crore steel plant site.

Uncertain of being given prospecting licence for Khandadhar iron ore mine, Posco said it would not wait long. “”We will start construction work at the plant site early next year with whatever land is available with us,”” Posco- India chairman and managing director Soung Sik Cho said. “”We are planning to start real construction over 493 acre at the plant site, preparatory work for which will start from next month,”” Cho said.

Source: Times of India