Possible. But, that depends on the level of inventories currently being held by the steel producers, stock holders and users at present. Although there are reports that global inventory levels are down in the last few months beginning February, a clear estimate is hard to find. Although discrete reports still talk about huge inventories piled up in different parts of the world, there are definite indications that levels now are much lower than in the early months of the year.

But, is the global steel demand rising? It is anybody's guess.

Steel prices have recovered by about 15-20 per cent almost everywhere. In normal times, this would have been considered a strong indication of a booming market. But not so in this case.Given the fact that the prices were down to rock bottom on which majority of the steel producers could not carry out any profitable business, this rise could be attributed more to reduced supply and price adjustments rather than to rising demand.

There are but many who believe that global steel demand has shot up. Commenting on the current trends in steel demand globally, the WSD, in fact, says that the demand for steel in 1999 may go up to 689 million tonnes - only 10 million tonnes lower than the highest ever figure of 699 million tonnes recorded in 1997. (both the figures are based on their own estimates). WSD optimism often in the past had seen no bounds. This one may also be no exception.

Is it a strong demand that has backed the steel price rise recently ? Let us have a closer look at it.

There are many factors which are responsible for the recent price recovery. One, the worst is over at least for the time being. Most of the economies in crisis have already passed through their terrible patchesand can only hope to do better now. Two, increasing anti-dumping cases worldwide have made the steel companies a little more cautious. Many of them have cut output instead and have reduced exports to avoid long and expensive litigation in foreign markets. Some of them have declined to reduce prices any further as such exports are not profitable.

Three, Russia has imposed a 15 per cent tax on its exports of steel and scrap. This has literally forced Russian firms to jack up their quotes. (However, reports show that they have not been able to fully pass on the tax burden on to their customers.) Four, speculation over a possible sharp increase in steel prices led to widespread cancellation of orders by the CIS producers.

There were buyers, traders mainly, who had booked steel at lower prices. Now To keep their commitments, they are desperate for materials and are ready to pay higher prices. Hence a price rise - particularly in south-east Asia. The question is for how long the CIS producers will really holdon refusing to sell at lower asking prices and allow accumulation of stock. With their economies nowhere in sight of a recovery and with the steel industry having while. The internal competition among the CIS companies for global market share is so high that they have no option but to settle for a competitive level of prices. Five, there are definite signals that the EU boom has reached a plateau. The same is true for US. EU, although has seen some recovery in prices, that is mainly due to drastic drops in output and trade actions restricting imports into this territory. The overall economic prospects of this region are not encouraging. In Asia, only China and South Korea seem to be going strong. Therefore, demand for steel is unlikely to improve in the coming months. Therefore, safely, one can put aside the rosy projections of global steel demand soaring to 1997 levels leading in turn to a sharp increase in prices. The only factor that may be kept in mind is that steel is one industry always known to be aneasy victim of wild speculation.

As it had happened many times in the past, unbridled speculation may drive steel prices up to unreasonable levels. But, material conditions of market sooner or later takes over and the prices are usually brought to competitive levels.

Let us not reject the WSD forecast outright and look at the thinnest possibility of that coming true.

Let us imagine a situation when EU and USA, say, continue with perhaps larger consumption of steel. Say also, the recovery in the south-east and east Asia is all round with their manufacturing sector turns around with increased exports and stronger domestic demand and unfinished infrastructure, housing and industrial projects are put back in the rails. Japan gets back to shape. And the Indian market picks up as also that of Latin America. The oil countries do better with their increased earnings from higher oil prices.

All these, in other words , will mean, a real global economic recovery that will push steel demand up considerably. Andcertainly. Most forecasts known, however, are just the opposite. Even if there is a 'miracle', that the WSD predicts, it will take time. Not certainly in a few weeks or a couple of months. If so, our timeframe changes to the next year or the one after that.

Coming to the possibility of steel prices rising, there another aspect that cannot be ignored. The steel companies in major market economies did not see their bottomline knocked off by low prices in their results of 1998 as the first half of the year still remained sufficiently good to cover up the losses in the second. The first quarter results of this year, known for many major steel companies, have shown ominous signs. This cannot go on any longer. The steel companies will do everything possible now to keep prices up. After all, they are accountable to their shareholders and bankers. They will have to take corrective measures like production cuts or shutdown of facilities. There is already a 6-7 per cent drop in global steel production in the firstfour months of the year. Although such capacities can be brought back quickly if prices improve, there may be momentary panic followed by speculation that may work to push steel prices high for a short while. In any case, the long term prices will depend on the recovery of global demand. Or, be insistent on higher prices. In the bargain, they may gain some grounds.

If the grand global economic recovery begins in a span of time and steel production does not keep pace with rising demand, there is the possibility of even a shorter term revival of the steel prices worldwide. Ifs and buts, however, are more important than the pure logic in the argument.

The author is chief economist, ministry of steel. The views expressed here are his own and not those of the ministry