Consultants MEPS of Sheffield say that prices have dropped to their lowest levels in five years for a wide range of products, including hot rolled coil/sheet and coated strip. These represent around 50% of the ordinary steel supplied to the market.
“Steelmakers are now suffering the penalty for the massive overproduction during 2000 when output increased by 7% year on year. With a real demand growth rate of less than half that level, it is not surprising that the global steel sector is currently facing an inventory draw-down,” the consultants say.
The firm believe that the impact of the over production will be spread across continents. However, steel manufacturers in North America and Eastern Europe will probably be the first to feel the pressure. “Asian, South American and West European mills are not fireproof. Jobs in steel, already under threat in a number of regions, will be cut back quite dramatically this year.”
The heart of the problem, it is believed, is that more steelmaking capacity is coming on stream in the developing world in particular which is contributing to oversupply. Such as situation is likely to see continuing demand for material to be exported from the UK in light of slowing demand from Corus and elsewhere. But the overcapacity will also see 2001 prove a difficult year for ferrous metal recyclers because of weakening of prices.
MEPS say that it would be extremely beneficial to the industry “if a moratorium on new iron and steelmaking installations was agreed by the industry – at least for the production of hot rolled flat products. Clearly, this would be difficult to achieve. At least governments and banks should be alerted to the inherent problems for future pricing in this sector and the likelihood of poor returns from capital invested if current excess capacity continues.”
Stainless Steel
For stainless steel the picture looks a little brighter. MEPs consider that 2001 could prove to be one of minimal growth after the excesses through the first nine months of 2000. “We can see several negative factors impacting on the market in the near future but the long term prospects remain bright.”
Stainless steel output in the Western World is expected to be 18.2 million tonnes in 2000. A further 800,000 tonnes is likely to have been produced in the former command economies in China, Central and Eastern Europe. This gives a total world production of 19 million tonnes and represents an increase of 7.6 percent over the year earlier figure.
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