Ailing Steel Finds Hope in Improved Demand
At last, some hope for the ailing steel industry.
Steelmakers are counting on improved demand for steel to revive the industry, which has suffered because of a demand slump from key consuming markets in auto and construction.
On a global scale, world steel production experienced a depression by 22% at 449.2 million tons for the first five months this year. This is a far cry from production levels in 2007, which was 1.35 billion tons, with China accounting for 40% of global production.
When the economic slump hit in mid 2008, the industry bore the brunt as the auto and construction industry experienced severe losses because of all-time declines in demand.
Hopes are rekindled, albeit small, as steel producers in the United States and Europe received more orders within the past month, setting off a resumption of manufacturing activity.
No.1 steelmaker ArcelorMittal, which operates in the United States and Brazil, earlier announced it will put some of its idle capacity back to work. U.S. Steel Corp. echoed the same plans.
However, companies are exercising caution as full recovery is months away. Though there is some improvement in demand, real demand for steel remains to be seen.
Consultancy firms that advise industry leaders are looking at a rocky road to recovery for steel. John Lichtenstein of Accenture commented that increased production carried with it the risk of price increases, as it will eventually overwhelm real demand.
Several European producers have raised prices, one of them being Thyssenkrupp, Germany’s top producer. Europe’s No. 2 steelmaker Corus also announced intentions to increase their prices.
The industry is poised for slow and prolonged recovery, which according to Daniel DiMicco, CEO of America’s Nucor Corp, will take three years at a minimum.
In the next months and years, DiMicco expects to see an increase in operating activities while others will opt for a restart.