Steel prices are likely to see a dip from the highs they are currently ruling at. The prices of steel and steel-making raw material (such as metallurgical coal and iron ore) have steadily risen so far in 2008 (first seven months) because of the strong demand for steel, especially in developing economies. However, they are expected to fall during the remainder of 2008 and in 2009 — due to higher production, especially in China, and weakening demand from OECD countries due to tight credit market conditions.

 

Indian market

Steel consumption in India is expected to see strong growth. Factors contributing to this growth, as in most transition economies, include the rapidly expanding oil and gas sector, the replacement of ageing infrastructure and higher incomes, which would result in increased demand for housing and steel-intensive manufactured goods (automobile manufacturing, electrical appliances and construction).

 

India is likely to see a growth of almost 9 per cent in 2008 and a further 10 per cent in 2009, according to a report from Abare, Australia’s independent government economic research agency.

Steel production is also set to see a simultaneous growth in line with this surging demand. India is poised to record a growth of over 5 per cent in 2008 and around 7 per cent in 2009. Growth in developing economies can be pinned on their transition towards market-based economies, which leads to increased private investment in steel-making facilities, among other things.

 

Global estimates

Meanwhile, on a larger scale, global steel consumption is set to grow by 6 per cent to 1.4 billion tonnes in 2008, and a further 5 per cent to 1.47 bt in 2009, according to Abare estimates.

 

Global steel production is estimated to grow by 6 per cent (to 1.42 bt) in 2008 and another 5 per cent (1.50 bt) in 2009, keeping up with the consumption patterns. This growth in production is mainly driven by China’s industrialisation, with China expected to account for almost two-thirds of world production, seeing an estimated increase of around 10 per cent in 2008 (537 mt) and 2009 (591 mt).

 

Steel consumption in China is also expected to continue its strong expansion pattern, accounting for almost 60 per cent of global consumption as steel-intensive industries are expected to grow, as income and, consequently, infrastructure spending rises. –Business Line