OECD - Paris, 8 November 2006
OECD Steel Committee sees market outlook bright but slower demand expected in 2007
The global steel market is enjoying its fifth consecutive year of strong output and demand growth. The outlook for 2007 is expected to remain relatively bright, but a less vibrant world economy should slow demand and production growth, according to industry and government officials at the OECD’s Steel Committee meeting in Paris on 7-8 November 2006.
Statement from the Risaburo Nezu (Japan), Chairman of the OECD Steel Committee
The situation in world steel markets remains strong. Continued capacity expansions observed in various parts of the world could, however, endanger positive market developments.
World steel production
Crude steel production is on track to grow by around 90 million tonnes in 2006, i.e. by 8%, to reach 1.22 billion tonnes as a result of synchronized production growth in most regions of the world.
World demand for steel
Global demand growth has accelerated in 2006, in line with the strengthening pace of world economic activity and buoyant infrastructure and other investment in rapidly growing developing economies.
Steel trade has been stimulated by the buoyancy in global demand. Developments have been dominated by China becoming the world’s largest exporter of steel products in the first half of the year, surpassing Japan, Russia, and the European Union. Steel import growth has been particularly pronounced in the European Union and North America, where inventories have increased significantly. Furthermore, such imports have already forced, or will force steel mills in these economies to reduce production.
After declining through much of 2005, steel prices recovered during the first half of this year. In some markets such as China, however, prices have remained soft this year reflecting local oversupply of steel. More recently, prices have started to recede in some markets in response to high inventory levels.
Consolidation in the industry has accelerated, highlighted by the recent Arcelor/Mittal and envisaged Tata/Corus mergers. Arcelor-Mittal will account for around 10 per cent of world steel production. Though consolidation will strengthen steel companies’ influence in world markets, the industry remains very fragmented as compared to the concentrated iron ore industry for example. Concern was expressed that steel producers in various parts of the world have increased capacity significantly or intend to do so in the years to come by extending existing capacities and/or creating new capacities, whilst most forecasts for demand over the years to come suggest that worldwide steel capacities are largely sufficient to satisfy demand requirements in the future. Governments of Member economies of the Steel Committee should ensure that their steel industries be aware of the concern over world-wide increases in steel making capacities and their responsibility for the longer-term health of the world's steel market.
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