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Expert Study Predicts Global Steel Purchase Not Likely To Witness A Surge Till 2012

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by - 5/4/2009 5334 Views

Not so good news for the steel and scrap Industry

steel.jpgAs per a recent expert study the demand for steel is unlikely to witness an upsurge anytime soon. In fact the CRU is of the opinion that global demand for steel would be lackluster and there is hardly any chance of improvement till 2012. This information was revealed by Gavin Montgomery, a CRU analyst, at the annual scrap metal conference.

The market experts also predicted that global steel consumption is likely to take a nosedive this year and the rate of decrease could be as high as 15 percent. According to the CRU estimates the demand for steel sheet products worldwide is likely to diminish by 22% in 2009. Last year it was 380 million tons but it can come down to 300 million tons. 2007 was a lucky year for the steel industry. However since then the industry has been facing a downturn.

Montgomery thinks that the absolute consumption levels of steel will not go back to the levels of the yesteryears until 2012. The rise in price will be limited since the demand recovery would be slow. The industry is also reeling under the problem of overcapacity. Montgomery is a steel analyst for CRU and he is well versed in the trends of the industry. He said that conditions are likely to be extremely adverse for the industry this year.

Some units might have to put an end to steel making capacity in a permanent way, he warned. Chuck Bradford an associate of Bradford Research Inc said that sluggish growth in the industry can take place in the last part of 2009 and the beginning of 2010. He said in his statement that an inventory pick-up was what he was looking for. He told that delegates at the conference that no one can liquidate inventories forever.

As a matter of fact, a number of the USA based steel companies, are not going to gain from the lower prices. This is because they are trapped in deals spanning over several years made at the higher level of the last year. However Bradford took the remark of Ford that it will manufacture 25 percent more vehicles in the second quartet of the year as it had cut down on inventories in a good taste. He also said this is a positive sign for the recession struck market.

But he also pointed out that things will not be so easy for General Motors, one of the largest car makers of USA. GM would require longer time to work out its inventory overhang. He further said that though some of the steel service centers have cut down inventories but their average rates of shipping will not improve in 2009. The slower pace had set in the last quarter of the previous year.

Almost 30 percent of the produced steel is used in infrastructure building and construction. But the state of these industries which utilize steel is in decline. Bradford expressed his opinion that the bailout money churned out by the Obama administration would start showing its effect on the industry in next year benefiting the  small scale producers.

Category : Metal

Tags : Metal Scrap,


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