GLOBAL CRUDE STEEL PRODUCTION TO RISE 4.1 PERCENT IN 2006

MEPS estimate for world crude steel output this year at 1176 million tonnes. This represents an increase of 4.1 percent over the 2005 outturn. Blastfurnace iron production is predicted to reach 827.5 million tonnes - 5.4 percent up on the figure recorded in the previous twelve months. Only modest gains are expected for direct reduced ironmaking.

The majority of the steel output improvement will take place in China and India. In these countries the blast furnace/oxygen steelmaking process is dominant. Consequently, the rate of growth of blastfurnace iron making will outpace steel manufacturing in the near term. The high cost of energy is restricting the rise in direct reduction of iron in several countries.

We estimate that 85 percent of the increase in global crude steel output will be supplied from the Asian continent. In fact, Chinese mills will be responsible for almost 80 percent of the total, despite the anticipated slowdown in the rate of growth in steelmaking in the country in 2006, compared to recent years.

Steel makers around the world are exercising a degree of control in output in an effort to put a floor under the price decreases witnessed in 2005 when customers embarked on a period of inventory reduction after the excesses of 2004. In many countries this action has stimulated prices and in a number of cases has revived demand on the mills.

Steel output in the EU-25 member states is picking up faster than we anticipated. The threat from Asian imports has not materialised and is not likely to be significant in the next few quarters. We have, therefore uprated our forecast production this year to 188.5 million tonnes - 2 million tonnes up on the prior twelve month period. Blast furnace iron making is also expected to rise as the flat products’ market improves.

It should be noted that approximately half of this years anticipated higher steel manufacturing is likely to come from the new entrants from Eastern Europe. This is principally due to improved economic performance and fewer maintenance outtages.

Crude steel production in Europe (excluding EU and former USSR) is predicted to increase by 0.7 million tonnes this year compared to 2005. This equates to a rise of 2.2 percent. Improved output is likely in Turkey as new capacity is commissioned.

Steel output in the former USSR is forecast to expand by 1.3 million tonnes in 2006 relative to the previous year. Blastfurnace iron making is likely to improve by 0.75 million tonnes.

North American crude steel output is expected to increase by almost 2.5 million tonnes (2 percent) this year in comparison to 2005. Most of the improvement is expected to occur from the integrated producers. Blast furnace ironmaking is, therefore, predicted to expand quite significantly.

Total steel making in South America is not likely to increase in 2006. The main reason for this situation is a major plant breakdown at CSN, the Brazilian integrated producer.

African steel manufacturing is forecast to hold up in 2006 at a figure close to the outturn in the previous twelve months. The year should start off well but a planned blastfurnace outtage in the second half in South Africa should limit any possible improvement.

Production of steel in the Middle East should continue its inexorable rise through 2006. An increase of 5 percent is anticipated. The majority of the gain is likely to come from steel manufacturers in Iran. Investment in new capacity continues apace in this country.

We expect total Asian steel production to increase by 40 million tonnes in 2006 compared to the year earlier figure. Blastfurnace iron production is predicted to be 36 million tonnes higher.

Blastfurnace relines and increased import volumes are likely to restrict steel manufacturing in Oceania in 2006.

Source: MEPS - World Steel Outlook