Steel industry: present perfect, future tense

Font Size

Print

Feedback

Email

Discuss

• Discount Shoes

Related Articles

Import of fodder seeds likely: PawarPolicy vacuum, supplies behind vegetable inflationIndia deposits rice, wheat seeds in Svalbard Vault

: The sharp rise in steel prices on the global market in the last four weeks have raised hopes for another good run for the industry in the days to come. There are reasons, however, to remain cautious on the developments of what has been observed do not indicate a long term revival of the market. Given the fact that the current rise in prices has been due to reduction of steel supply raises questions over the longer term sustainability of the prices. There are many other issues also to be considered before one takes to predict steel prices movement on the global market.

The latest statistics released by the International Iron and Steel Institute (IISI) show a sharp reduction in the growth rates in crude steel output in the month of July 2005 over the corresponding period last year (July 2004) and a marginal increase over the previous month ( June 2005). The growth rate for January-July production over the same period last year has also dropped.

Whatever increase has been observed has been mainly due to the rise in crude steel output recorded in China and India mainly and in Africa and the Middle East where in any case the production volumes are low. While China has recorded 28.1% increase in crude output in January-July, the July production was up 28.6%. In fact both the numbers are slightly lower than those recorded for the early periods and months. The gradual slowdown in the growth rate is visible. What surprises the most is the growth recorded by the IISI for India. Wherever they have collected the data from, the 18.7% increase in the first seven months of the year and 34.3% in the month of July are numbers that will raise eyebrows of many in the steel industry in India.

While these estimates may not totally tally with the numbers generated by the official agencies, the fact remains there is no denying that steel output in the small and medium sectors mainly is growing very strongly.

The problem is if prices have risen mainly because of production cuts and not so much because the demand has risen, the sustainability of the price rise in the months ahead may come under some questions.