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An overview of year 2009 for steel industry
Like on any other New Year's Eve, we are tempted to evaluate past events, with a slight dissatisfaction because things could have been better, and to engage in prognostications, with the hope that the future will be more generous with us. So, how were things this 2008 and what does 2009 hold in store for us?
Undoubtedly, 2008 was an exceptional year for global steel and mining sectors, a year of extreme highs and lows.
The first half of 2008 was extremely good with the prices of steel, ores and coal etc peaking to unheard of levels, thus taking each and every one of the steel makers and miners to a pinnacle. Just to cite some examples spot prices for iron ore crossed USD 200 per tonne, coking coal USD 350 per tonne, coke USD 750 per tonne, billets USD 1200 per tonne and rebars USD 1500 per tonne. This market situation sustained the confidence of steel makers and miners and almost every one continued to grab growth opportunities through acquisitions or expansion projects.
But the second half of 2008 turned the tables completely casting global doom. The steel price slide started in the first 10 days of July, 2008 with a sharp drop of more than USD 100 per tonne as Ukrainian mills started reacting to their loss of market share in important regions to aggressive Chinese deals done in April and May. Although steelmakers were still hopeful of short term recovery, buyers, as usual in a crashing scenario, decided to adopt a wait and watch policy, withholding demand resulting in further crash. But the most severe jolt came when the global financial crisis surfaced with bankruptcy of Lehman Brothers. And since than there has not been any looking back.
As the order books of steel mills dwindled, they had no option but to prepone maintenance followed by shutting down some of their facilities. Almost every steelmaker was forced to announce production cuts followed by deferment of their ambitious expansion plans and cost cutting measures including massive job cuts. Miners also had to resort to these measures as the demand boom suddenly collapsed.
The writing on the wall is clear. The initial happenings were just the tip of the iceberg and the actual situation is much more severe. Global economy as a whole is facing one the most difficult crisis ever faced. Despite desperate efforts by all governments to prop up economies, the situation is becoming worse with every passing day. Many countries are already facing a recession whilst many others are on the way. The consumer confidence is at the lowest ebb. The situation is further aggravated by tightening of credit by banks and financial institutions. As a result the demand for end products has simply vanished.
Although, nobody could see the steel demand erosion and price crash six months back, many are now predicting an upturn in the 2nd quarter of 2009, some in second half and few by the end of 2009. But you may agree that, under this extraordinary situation, it would be more prudent to only hope for the situation to improve, while preparing to face the worst.
But the silver lining is that inventory levels with buyers are now very low and prices have been stable for flat products and recovering for long products. On top of that all governments are trying their best to prop up growth by unveiling huge bailout packages.
So let's remain optimistic and wish that the upturn happens and global steel industry recovers quickly. |  |
 
The steel industry is out in the cold
If steel doesn’t survive, no industry will. That was the common refrain of all steel manufacturers in 2008, a year which realised the worst fears of the steel industry, both global and domestic. Among the horrors: Prices more than halved a downslide in the automobile and construction industry weakened demand and liquidity dried up. Contingency plans to survive the meltdown had to be put in place. The last two months saw maximum activity on this front — companies streamlined production, pruned inventories, cut prices and took rising costs head-on.
While some of the big guns have stuck to their production schedule and opted instead for price cuts, some medium-sized players have taken a production cut as well. Capacity expansion plans have been pushed back. Is there a silver lining in 2009? Vishal Agarwal, managing director, Visa Steel has this to say: “2009 is likely to be a year of consolidation for the Indian steel industry. Survival will depend on the correction in raw material prices and government proactive ness in increasing infrastructure spending and also increasing import duty on steel.”
A recent global view in the Financial Times states that a section of observers think it could take 4-5 years for world steel to regain its level of 1.34 billion tonnes, reached in 2007. However, few feel that the speed and decisiveness of the cutbacks by big steel makers will prevent a steep fall in earnings. But there’s also a view that the speed and decisiveness of cutbacks by big firms will guard against a steep fall in earnings. In India, positive indications are in the nature of sector-specific government incentives, falling interest rates and duty sops. With raw material prices falling, costs are slated to come down significantly. | |
Recession reports by TATA Steel MD
Recession reports - TATA Steel MD gives tips to counter it
- 02 Jan 2009
NewKerla.com reported that TATA Steel MD gave tips to defeat the deadly slowdown, which has created a slowdown in not only the Industrial sector but all walks of life.
Mr B Muthuraman MD of the steel major in his new year message released said that “Be it an industry, an institution or even a family, exercising prudence in spending, reducing costs by improving efficiency, taking better care of our environment, adhering to safety norms, improving our services and product quality and an overall approach of improvement in anything we do will see all of us emerging stronger and better from the current economic situation.”
Mr Muthuraman said that “The year 2008 has been an unprecedented one in recent history starting on a very high note and ending with a deep and wide global economic downturn. The year 2009 will be a challenging one for all of us. I urge all of you to take the New Year as an opportunity rather than threat.” | |
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An overview of year 2009 for steel industry
Like on any other New Year's Eve, we are tempted to evaluate past events, with a slight dissatisfaction because things could have been better, and to engage in prognostications, with the hope that...
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