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Steelmakers will smash the 1 billion tonne barrier this year

MEPS (International) : 01 November, 2004  (New Product)
MEPS' prediction for global steel output in 2004 is now 1035 million tonnes. This equates to an increase of 7.5 percent on the figure recorded in 2003. This is an outrageous rate of expansion for a basic industry.
At the start of the year there was concern that steel shortages would occur due to a deficit in the supply of raw materials. In fact, production will rise by 72 million tonnes. This is the biggest annual increase in the history of the steel industry. Some shortage!

The fear of supply difficulties prompted over ordering by customers and created a false market in steel. Demand is expanding in China. Consumption will probably grow by 42 million tonnes - crude steel equivalent. The remaining 30 million tonnes will have been taken by purchasers in the rest of the world.

This means that steel consumption in the world, excluding China, will grow by 4 percent in 2004. We see very little in the economic performance to justify such an increase in real demand for steel. It is our opinion that a significant amount of inventory building has already taken place and more is likely over the next few months. Discussions with many consumers around the world confirm that they have placed extra orders as a hedge against possible shortages.

We are witnessing something of a phantom boom which will inevitably turn into a real downturn unless steel demand growth in China can be maintained at well above 14 percent per annum in the short/medium term. Unfortunately, the Chinese government is trying to curb investment in the basic industries and unnecessary construction projects - the main engines for the steel revival.

Crude steel production in the enlarged EU is forecast to expand to 192 million tonnes in 2004 - up from 183.4 million tonnes a year earlier. This equates to an annual increase of 4.7 percent. Output from the EU-15 is expected to rise to 166.75 million - a gain of 4.3 percent.

In the non EU countries of Western, Eastern and Central Europe, we are forecasting large increases in steel manufacturing as producers take advantage of strong export demand from all parts of the world. Turkey has been particularly active in export markets. We expect production to rise by 2.5 million tonnes (13.7 percent) this year.

Production of steel in the former USSR continues to expand at a rapid pace. We expect output to grow by in excess of 5 million tonnes this year compared to last - a rise of 5 percent. This improvement is based on a combination of export and domestic demand.

We are witnessing a strong bout of activity in the steel sector within the NAFTA region and forecasting an increase in output of 6.6 percent in 2004 relative to the outturn in 2003. Shortages at the start of the year boosted mill order books and supply continues to be tight.

Regional demand in South America is fair. Increased output will be recorded in 2004 for most countries. Production is predicted to reach 45.4 million tonnes - up 6.6 percent on the previous yearís figure.

African production of steel is not likely to grow in 2004. This is mainly due to a weak performance from the South African steel sector, which is likely to report slightly lower output figures in 2004.

We forecast production of steel in the Middle East to expand by 0.5 million tonnes in 2004 compared to the previous twelve months. The main engine for this improvement is the Iranian steel sector. A gain of 7.5 percent is anticipated in this country. In contrast, Saudi Arabian output is likely to slip. Small gains are likely in Qatar.

Steel making is forecast to increase in Asia by almost 45 million tonnes (over 10 percent) this year. As usual, the Chinese producers will contribute the bulk of the extra activity.

Steel manufacturing in China is now predicted to reach 260 million tonnes. This equates to an increase of more than 40 million tonnes (18.7 percent). The rise at the eight month stage was 21 percent. Most of the extra output is to serve the domestic market. Net imports are likely to be slightly down.

Japanese steel production continues to rise. The improvement is relatively modest but, nevertheless, is in the right direction for the steel mills. Most of the increase is for supply to the consumer goods segments. However, the construction sector is also booming at last. Export volumes remain at good levels, propped up by sales to transplant factories in the Asian region.

Indian steel production is expected to show modest growth this year. The economy appears to be moving ahead quite well. The South Korean economy is sluggish. Domestic demand is flat, overall. The steel sector is, however, likely to report another record year of output. The steel makers in Taiwan are also expected to report record production this year.

Source: MEPS - World Steel Outlook
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