Steel guru Peter Marcus, managing partner of World Steel Dynamics, confirmed the worst fears of the industry at a seminar in Kolkata on Wednesday when he said steel prices could soften by as much as $100 a tonne by the third quarter of this year, though there could be a recovery soon after.
At the moment, prices are hovering between $575 and $600 per tonne. If Marcus' prediction comes true, prices may erode by over 15 per cent.
Indian steel producers, however, are brushing aside any talk of a slowdown. Most of them expect the international market to stay buoyant for a while in the hope that China will remain the biggest buyer of steel. For over two years, China has been driving the global steel market.
In 2004, it imported about 30 million tonnes of steel (almost the same as India's total steel capacity of 32 million tonnes). The total steel demand in China is projected to cross 300 million tonnes this year, up from 275 million tonnes in 2004.
"The prices may not go up, but they will definitely remain stable in the region of $600 a tonne for the rest of the year," Ispat Industries executive director (marketing) Vinod Garg said.
Those who suspect that global demand may slacken say strong local demand will ensure the industry registers robust growth. "International prices may flatten, but local demand will continue to be strong with the country's GDP growing at 7 per cent," said a Steel Authority of India Ltd executive.
But recent announcements by global steel majors tell a different story. Last week, three of the world's leading steel producers -- Mittal Steel, US Steel and AK Steel -- said the markets could weaken in the months to come with demand cooling off in key markets and a rise in iron-ore
Mittal Steel, the world's largest steel producer, in fact, said it would cut production in the current quarter (April-June) in an effort to shore up prices.
Most of these companies fear the demand from China might cool off this year. The demand for construction grade steel in China is expected to remain buoyant for some years, at least till the 2008 Beijing Olympics.
But this need not translate into huge orders for global steel companies as local Chinese firms have been ramping up production in order to bridge the deficit in supply. Trends suggest that in 2005, China may turn into a net exporter of steel. China's consumption of crude steel grew 11 per cent in the first quarter of the year, while output rose as much as 23.8 per cent.
While the Chinese market is expected to be cornered by local steel companies, other important markets like the US and Europe have shown definite signs of a slowdown. Several steel companies have reported a decline in shippage to the US in view of a shrinking demand.
Is the party over for the steel industry?
Metal demand
Price concerns
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Steel prices may soften by as much as $100 a tonne by the third quarter of this year, though there can be a recovery soon after
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However, most Indian firms are expecting a buoyant global market driven by China's demand
Chinese ways
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Local Chinese firms have been ramping up production in order to bridge the deficit in supply
- China may even turn into a net exporter of steel by the end of this year
