Global steel market outlook Prepared for: custeel Conference


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Global steel market outlook

  • Prepared for: CUSteel Conference

  • Shanghai, September 23rdth, 2005


Presentation plan



In the last few month CRUspi has recovered some of losses after losing 60% of the gains made in 2004-2005. Is this the start of a global recovery in steel prices?



Regional prices do broadly move in similar directions, with a few exceptions, due to trade acting as a great leveller between markets



But flat products and long products can diverge, as they did in 2004, though even these markets seem to converge eventually



During the first and second quarters of 2005, year-on-year growth in world sheet consumption fell below 3% - the last time growth was this slow was three years ago…



The slowdown in the rate of growth in consumption has been most keenly felt in North America, followed by Europe (in Asia it has actually risen)…



Mills have responded to the slowdown in their orders by reducing operating rates, bringing forward planned maintenance and/or idling production facilities…



However, the final quarter of this year is likely to see an acceleration in the rate of growth in demand, primarily owing to renewed buying from stockists and service centres…



North American sheet inventories have been drawn down sharply in recent months, and have now bottomed-out…



Demand has rebounded on a quarter-on-quarter basis for the first time in over a year (by over 1m s.tons from Q2)…



With inventories and imports at low levels, and numerous blast furnaces still off-line…



The demand/supply balance has tightened significantly, and a price spike has occurred



As as result, the price premium that the US market attracts over others is likely to rise in the near term…



High prices will also encourage local mills to bring blast furnaces back on-line and to increase output…



As such, we forecast a fairly sharp downward price correction to commence at the end of the year



There has been little change to the modest performance of the West European economy…



An overhang of sheet inventories accumulated in the first half of 2005…



After a moderate rebound in late 2005, European sheet prices are expected to trend downwards



In 2006 and 2007, the rate of growth in world industrial production is expected to slow slightly…



Meanwhile, cost pressures - which were a major factor behind the surge in prices last year - are expected to progressively ease…



And with global sheet making capacity set to increase significantly during the coming years…



But Chinese capacity is set to increase significantly during the coming years…



Chinese net trade has been transformed China, net imports of steel products



And this is likely to mean that output growth will continue to outstrip demand



We believe that the ability to satisfy demand will increase faster than demand itself, and that sheet prices will - from the first quarter of 2006 - come under downward pressure…



Which is likely to bottom out in 2007, when the expected low point in the demand cycle coincides with significant capacity expansions and reduced cost-push pressures





We provide a CRUcial presence around the globe…





Please address questions or comments relating to this presentation to:

  • John Johnson, Chief Representative

  • CRU International Ltd Beijing Representative Office 1821, Tower 2, Bright China Chang An Building 7, Jianguomennei Avenue, Beijing 100005, China

  • Tel.: 10 65102206 Fax.: 10 65102207 Email: john.johnson@crugroup.com




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