MEPS FORECASTS GLOBAL CRUDE STEEL PRODUCTION IN 2009 TO DROP BY 9.5 PERCENT BUT IRON ORE CONSUMPTION WILL BE JUST 5 PERCENT LOWER

MEPS forecasts global steel production at 1200 million tonnes in 2009. This represents a 9.5 percent reduction on the outturn in the previous twelve month period. This result will be significantly above predictions by most pundits earlier in the year but in line with MEPS estimates in their annual report “Global Iron and Steel Production to 2013”.

Worldwide blastfurnace ironmaking is expected to be down by just 5 percent, year on year. Direct reduced iron output is likely to show a reduction of near to 8 percent on the same basis. This indicates that scrap based electric melting will turn out to be the main casualty in the supply of steel over the year. However, significant regional differences are apparent.

Mills utilising the blastfurnace/oxygen route in the EU and NAFTA countries have made and continue to make the most significant cuts in supply. In contrast, Indian and Chinese steelmakers have lifted their output of molten iron. In fact, total Asian blastfurnace iron production in 2009 is forecast to increase by 40 million tonnes, year on year.

The steel sectors in most industrialised nations have been badly hit by the economic crisis. Major curbs in production of in excess of 30 percent have been forced upon most mills in the European Union, North America and Australasia. Even the low cost producers in the CIS and South America have suffered from the global financial problems - reducing supply by approximately 20 percent this year. Demand in Asia is mixed but steel output will be up marginally in 2009.

Direct reduced iron production will be down this year - the first annual reduction since 2001. The global economic difficulties have limited activity in the CIS, North and South America. However, DRI production held up remarkably well in the Middle East and India.

MEPS believe that steel manufacturing is expected to pick up quite significantly in the EU in the final trimester of this year as previously closed capacity comes back on stream. Inventories are low throughout the supply chain. Plant utilisation is likely to rise from 57 percent in the third quarter to near 67 percent in the final three months. Despite this improvement, the total output in 2009 is forecast to decline by more than 30 percent on the year earlier figure.

Steelmaking in the non EU European nations is forecast to slip by approximately 8 percent in 2009 compared to the prior year. Local consumption has been weaker as a result of the economic downturn.

Steelmaking in the CIS region in 2009 is expected to be 20 million tonnes (17.4 percent) below the outturn in the previous twelve months. Construction demand has been particularly badly hit in the region as the global financial crisis took hold.

South American steel manufacturing will be down by approximately 20 percent this year as the global financial crisis takes its toll on both export and domestic sales.

The African steel industry will escape the global economic downturn with only limited damage. MEPS envisage that mill output this year is likely to decline by 2 million tonnes on the outturn a year earlier to a figure of just above 15 million tonnes. This represents a reduction of 11.6 percent.

Middle East production of steel in 2009 at 17.5 million tonnes. This represents a 5 percent increase on the outturn in the previous twelve months. The major steel producing companies have been virtually immune from the global financial crisis. New capacity has come on stream recently and further additions are in the pipeline.

A rise in steel production of 16 million tonnes is forecast for total Asia in 2009. Significant percentage gains in China and India will be partially offset by substantial declines in Japan, South Korea and Taiwan.

Source: MEPS - World Steel Outlook