STEEL TAPS THE BREAKS
Steel pricing has been a wonder to behold the past two years, as the booming Chinese economy put a strain on world supplies of steel and its basic ingredients, including ferrous scrap.
But the global steel industry and its suppliers may have begun adjusting to China’s surge to the world’s leading steel producer, which means demand and supply are working their way closer to a balance.
The three speakers at the Ferrous Spotlight session of the Institute of Scrap Recycling Industries Inc. (ISRI) Annual Convention certainly seemed to agree that China was now in the driver’s seat.
"China has driven the market" for the surging steel prices of the past two years, said James May of May Commodity Associates, London. He noted that in recent years China’s steel production has grown by 14.4 percent, compared to a 2.8 percent growth rate for the rest of the world.
China has emerged as the world’s largest steelmaker because its economy and those of nearby nations in Asia now consume 50 percent of the world’s steel. China itself consumed 24 percent of the world’s steel last year, compared to just 10 percent for the United States.
Keith Busse, CEO of Steel Dynamics Inc., Fort Wayne, Ind., agreed that China is the driver of the steel market.
While money continues to be spent on building projects, consumer appliances and machinery in China, factors also could restrain its growth. "China has an energy problem," noted Busse.
He also predicted that the nation would begin encountering resistance from trading partners if it does not remove its currency’s peg to the U.S. dollar. "If China is going to really join the world marketplace, its currency is going to have to float," Busse said.
Commodities analyst May said he believed the growth of the Chinese economy will slow this year, although its steel consumption could still increase by more than 11 percent.
Additionally, May said he thought the United States and Europe have sizable steel inventories, which should help keep steel prices from increasing this year. May sees average hot-rolled coil prices falling to as low as $500 per ton this year, down from the $700 per ton they reached at their peak in the fall of 2004.
This will cause steel companies to put pressure on scrap suppliers to lower ferrous scrap prices, but the supply situation may not dictate lower scrap prices.
Busse said steelmakers and scrap recyclers would probably be happy for a replay of 2004. "Suppliers made money, we made money, and our customers made money. You don’t find many years like that," he said.
(Additional news about ferrous scrap, including breaking news and consuming industry reports, is available online at www.RecyclingToday.com.)

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