Stemcor Chairman forecasts a pick-up in demand for steel in H2 2010

In a statement given to Metal Bulletin Ralph Oppenheimer, Executive Chairman of Stemcor, said:

“It is even more difficult to make predictions for the New Year than it has been in the past. It seems probable that 2010 will open strongly with order intake at steel producers rising and prices strengthening. In part this is because of the seasonal increase in scrap prices during the winter months and in part this is because steel stocks have been run down and the pipelines of forward purchase orders on mills are depleted. The real question is what is happening to underlying or real demand rather than to the stocking cycle. Forecasts for economic activity are improving but it seems unlikely that there will be any noticeable increase in consumption of steel in the developed world in the first half of the year. There is therefore the danger of a small relapse in prices by the second quarter. In general there should be more confidence in the economy coming through later in 2010 and investment should pick up again so overall it should prove a satisfactory year.

The biggest risk to this forecast is the effect of China. The surges and declines in Chinese net steel exports have been the most important factor influencing the price of steel in the rest of the world. There is increasing excess capacity in China and if this leads to a renewed surge in exports, prices in the rest of the world will be adversely affected. China is a relatively high cost exporter of steel because of its lack of raw materials and the inland locations of many mills. It does not make sense for China as a whole to drive up the price of raw materials that must be imported by producing more steel for export. It may make sense to an individual Chinese producer to take export business at low marginal cost prices or even at a loss. How China resolves this dilemma between the national interest and the behaviour of individual mills will be the most critical issue for the steel industry outside China in 2010.”