GLOBAL CRUDE STEEL PRODUCTION WILL TOP 1.2 BILLION TONNES THIS YEAR

The latest forecast by MEPS (International) Ltd for global output of steel in 2006 is 1215 million tonnes. This represents an increase of 7.5 percent over the outturn in the previous twelve months and will be the fifth consecutive year that world steel production has exceeded 5 percent.

A number of factors are at work driving such rapid growth. Firstly, strong real demand continues in many important developing/emerging countries. Inventory rebuilding has also occurred in several industrialised nations after the production cuts in 2005. Finally, rising raw material input costs have prompted customers to order in advance of steel price hikes - creating an exaggerated market for steel products.

We expect 2007 to show further advances in supply. But the rate of growth is likely to moderate from the levels of recent years. A period of inventory drawdown is anticipated in many of the industrialised nations.

Asia remains the fastest growing region for steel production. Its share of total output will be close to 53.5 percent in 2006. This compares with a figure of 39.2 percent in the first year of this millennium.

Steel output in the European Union continues to pick up at a rapid pace as buyers place orders in advance of impending price rises. We now expect steel production to reach 193.5 million tonnes - an increase of approximately 3.8 percent. Real demand is growing but at a lower rate than supply by the domestic mills. Blastfurnace iron production will expand this year by 3.4 percent. The growth in construction activity has provided the background for electric steel makers taking a greater share of the market.

Crude steel output in Western Europe (excluding the EU) is predicted to expand by approximately 10 percent in 2006 compared to the previous twelve month period. New capacity installed in Turkey is now nearing full output - leading to a 2 million tonne rise this year. Substantial growth is also anticipated in Romania, Serbia and Montenegro after privatisation.

We now predict steel making in the former USSR at 117.5 million tonnes this year. This represents a rise of 4.8 million tonnes (4.2 percent), over the 2005 outturn. Virtually all the increase will take place from the blastfurnace/oxygen steelmaking route. There are, however, plans to install more electric melting in the future.

North American steel production is now forecast to reach 132.5 million tonnes in 2006 - up 5.6 million tonnes (4.4 percent) on the year earlier outturn. Blastfurnace iron making is predicted to expand by 4.8 million tonnes this year after relines at several major plants. Virtually all the gain will be from mills using the integrated blastfurnace/oxygen steel making route.

South American steel output in 2006 is unlikely to top the figure recorded in the previous twelve months. A major breakdown at a blastfurnace in Brazil has created this unusual situation. Electric steel making has increased to make up some of the shortfall.

African steel output in 2006 is forecast to be marginally down on the year earlier figure by a few percentage points. Most of the decline can be attributed to planned output cuts.

Steel production in the Middle East will be close to 16 million tonnes in 2006. Strong demand across the whole region is providing the background for the installation of steel manufacturing facilities. Total output is expected to rise 4 percent this year compared to last.

We expect Asian crude steel production to climb to 649 million tonnes in 2006. This equates to a rise of almost 11 percent in the twelve month period. Blastfurnace iron production is the dominant process and is forecast to expand by almost 14 percent this year. Asian iron and steel manufacturing equates to 63 and 53.5 percent of global output, respectively.

China dominates steel output growth in the region. We anticipate steel production rising by 16.5 percent to reach 407.5 million tonnes this year. Blastfurnace iron output is expected to climb to 396 million tonnes - a gain of almost 20 percent. Much of the improvement took place in the first trimester. Exports have increased but the majority of the extra steel manufacturing is for domestic consumption.

We expect production of steel in Oceania to be slightly down in 2006 compared to the previous twelve months. This is due to blastfurnace relines planned for this year.

Source: MEPS - World Steel Outlook