Those of you who read my presentation to the MSCI last September might be interested, amused or even shocked at the update that I presented recently to a corporate event (see slides below).
2008 finished about 10MT shy of the forecast I made in September and therefore 2009 looks to be down at least that on the relatively modest decline I was prepared to commit to then. This time I’ve added a more severe scenario showing a 10% demand decline in 2009 from 2008. (This is still shy of the 15% declines forecast by analysts in today’s AMM.) Even under my severe scenario however, very manageable downward adjustments to producer capacity could bring utilization rates up to reasonable levels.
Being wrong about the future is an occupational hazard. As I say somewhere in the presentation, there is an old Arab proverb that runs, “A man who forecasts the future lies even if he’s right.” Sadly little danger of that, even in September.
A Nerds of Steel reader in Australia wrote recently to ask where to find Turkish scrap prices. As we’re always trying to accelerate readers research and reduce their costs, I am following up with information on good sources of European scrap prices.
Subscribers to Steel Business Briefing and Metal Bulletin can find European scrap prices at a price. But there are a number of useful sources on-line that you don’t have to pay for, though scrap prices may not be as up-to-date as you may like. Also, understanding the local language might be a problem (some of the following are not in English) so post a comment or send us an email if you have any trouble.
The BDSV (The German steel recycling association) give a table of monthly historical German scrap prices starting from 1979 and currently (at mid-January ’09) showing December ’08 prices.
Eurofer (the European Confederation of Iron and Steel Industries) provides a monthly scrap price index for demolition scrap, new arisings, and shredded scrap. The index is an average for the main EU countries and is also now showing December ’08 levels.
Federec (the French recycling association) publishes quarterly reports which contain a quarterly scrap price index, but they are not up-to-date; the current report avaible shows results for July/August/September. For prices in France, though, it may be a good source.
Steelonthenet also publishes monthly scrap prices f.o.b. Rotterdam currently up to November ’08. These are supplied by Recycling International. Though you won’t find a table of prices on the Recycling International site, you can read through short articles describing pricing on their Market analysis: ferrous page.
Please do add a comment if you know of any other free (or subscription) sources of European scrap prices. And of course, keep the questions coming and we’ll try to help you find what you’re looking for.
US long products import licenses declined to 160,000 short tons in December from November actual imports of 173,000 tons. This compares to average monthly Jan-Nov imports of 282,000 tons. Licenses for all products were down in December except parallel flange sections, which climbed from 14,000 tons in November to 29,000 tons, mainly due to a rise in sections licenses for Russia.
2009 will be a difficult year for the global steel industry. How bad it gets and what happens on the other side of the global slowdown is impossible to predict. But there is no shortage of observers willing to paint a bleak picture. In a recent article in the Financial Times, Peter Marsh summed up the views of a number of analysts. Not surprisingly, the general consensus is decidedly negative. Here are a couple of excerpts: “Global steel production could easily plunge by 10 per cent or more next year” and (I’m paraphrasing here) “it could take 4-5 years for global production to return to the levels achieved in the first half of 2008.”
While these projections may prove to be right, they seem overly pessimistic to me. First of all, the latest forecast of global economic prospects published by the World Bank and discussed by James in a recent post, calls for the world economy to grow by 1.9% (PPP basis) in 2009. As I’ve argued in the past, there is a correlation between global GDP growth and the change in steel demand. If we plug 1.9% GDP growth into the model, the predicted decline in steel production for 2009 is -3% not -10%.
This is not to say that 10% is impossible, especially given the production cuts that mills have already made, but it does call into question whether a 10% reduction in global steel production is reasonable. Since the Second World War global steel production has never fallen by double digit levels in a single year. It came close in 1975 and 1982 when it fell by over 8%, and it has fallen on a cumulative basis by more than 10% over several years, but it has never fallen by 10% in a single year.
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November crude steel production in China declined 2% to reach 35.19 million metric tonnes while finished steel production remained flat at 42.30 million tonnes. Finished steel exports dropped 36% from October to 2.95 million tonnes and apparent domestic consumption reached a high of 40.37 million tonnes.
New figures from the World Steel Association show a further 10% drop in global crude steel output in November compared to October. Overall the first 11 months of 2008 are slightly above output in 2007, but if output is flat in December (which seems likely at best) then we 2008 is heading towards being about 2.5% below 2007 crude steel output. That would be the first year on year decline since 1997 to 1998.
The data is available from worldsteel above or in a Nerds of Steel spreadsheet below.
