Add to this blaak scenario the international fall in steel prices, and widespread dumping by several countries, banks and financial institutions have all the reason in the world to be concerned about their exposure to the industry. The pressure on steel firms is reflected in the recent quarterly results, with their bottomlines under pressure. But apart from the fall in profitability, the companies face serious problems on funding. First, thesecompanies are highly leveraged, which means that their ability to service debt is strained severely during the economic downcycle.

Secondly, inventories have increased, adding to the companies' need for working capital. The downgrade by credit-rating agencies will further aggravate the situation, as funding will become more expensive just when they can least afford it. Financial institutions and banks have been right to decide to continue to nurture their exposures to the industry, at least so far as the larger companies are concerned. But they need to carry out a review of each and every account carefully with a view to determining their ultimate viability before committing new funds. For several projects, even optimistic forecasts for steel prices may not be sufficient to establish their viability.