Despite moderate signs of demand improving in certain parts of the world and steel majors like Tata Steel and ArcelorMittal among others increasing prices and production accordingly, industry players are still projecting a slow pick-up over the rest of 2009 and believe that global steel demand is yet to revive fully.
Facing tough times, steel players all over the world have reported a dip in their margins during the April-June quarter. Nippon Steel, the world?s second-largest steel producer, which reported quarterly losses, forecast a worse-than-expected loss in the six months while ArcelorMittal, the world?s biggest steel maker, projected only a slow pick-up over the rest of 2009.
Expecting to see a gradual improvement in price and production levels in the second half, Lakshmi Mittal, ArcelorMittal?s chief executive and chairman, during the company?s quarterly result conference call, said steel demand won?t recover to pre-crisis levels until 2011, at the earliest.
According to Tata Steel managing director B Muthuraman, ?The average steel demand globally on a year-on-year basis for the quarter April-June is down by 30-35%. In the US, demand for steel is down by 50%. In Europe, demand declined by about 40-45%, but India and China have bucked the trend,? Muthuraman said, while announcing the company?s Q1 results.
Meanwhile, Steel Authority of India Ltd, one of India?s leading steelmakers which reported a smaller-than-expected 28% drop in its quarterly net profit, also cautioned that any dramatic upturn in global demand for the alloy was unlikely. Global steel demand is forecast to fall 10% in 2009. However, with initial signs of recovery in recent weeks, ArcelorMittal is now planning to restart production at some facilities.
ArcelorMittal has restarted three blast furnaces in Europe, two in the US. The company?s utilisation rate is expected to reach nearly 100% in some emerging markets but remain relatively low in developed markets such as Europe and the US due to weaker demand.
Likewise, Tata Steel is also looking at starting some of its blast furnace in Europe. Corus, which Tata Steel acquired in 2007 has struggled to keep its blast furnace working, while two furnaces in Netherlands will restart soon.
The company?s European unit Corus has already raised steel prices by around $40 a tonne, and it expects capacity utilisation in Europe may go up to 65% in the next quarter from 53% at present.