Facebook Blogging

Edward Hugh has a lively and enjoyable Facebook community where he publishes frequent breaking news economics links and short updates. If you would like to receive these updates on a regular basis and join the debate please invite Edward as a friend by clicking the Facebook link at the top of the right sidebar.

Monday, November 10, 2003

Here's Another One: This time it's China and Steel

So steel could be in short supply, while China accounts for 31% of total steel consumption. Didn't I hear someone say that all this growth was a fiction:

Soaring demand for steel - including a huge increase in Chinese consumption - means that a global shortage is likely next year, industry experts are warning. World Steel Dynamics, a US-based consultancy, says there is an 85 per cent chance of a shortage in the first quarter of next year.

Steel prices have been ramping upwards in the past year, together with the outlook for industry profits. Earnings before interest, tax, depreciation and amortisation of a group of 35 large global steelmakers studied by WSD are likely, according to the consultancy, to be up 10 per cent this year compared with 2002.Investors have taken note. The shares of quoted steel companies across the world, relative to the FTSE World index, are up about 40 per cent this year, and by 150 per cent since a low point in late 2000.

This year, the better-performing steel company shares have included Ispat, the Netherlands-based company controlled by Indian steel magnate Lakshmi Mittal. Ispat's shares, relative to the FTSE World index, have risen 128 per cent since January. On a similar basis, shares in Severstal, the Russian steelmaker, are up 94 per cent, while JFE, the Japanese steel producer, has seen a 70 per cent rise.

Helping the upward trend has been the consolidation in the steel industry driven by recent mergers that have increased the size of the largest companies, giving them greater pricing power. The moves were started 18 months ago by the creation of Luxembourg-based Arcelor, the world's biggest steelmaker, from three smaller European groups. President George W. Bush helped the process when in March 2002 he imposed tariffs of up to 30 per cent on US steel imports to help the embattled US steel industry.

The import restraints - although condemned at the time by many non-US steelmakers - have had the general effect of pushing up global prices. Steelmakers from round the world - which were in poor shape in many countries in the late 1990s - have been aided by a surge in steel demand in China, which next year will account for 31 per cent of total steel consumption of 936m tonnes, according to projections from the International Iron and Steel Institute, compared with 22 per cent out of 780m tonnes in 2001.
Source: Financial Times

No comments: