Prospects for a glut of steel production-retrospective

The American Iron and Steel Institute's site had a story from the Financial Times discussing this:

Steel Glut Unlikely, Expert Predicts
February 13, 2006
Financial Times

By PETER MARSH

Fears that overproduction in China will de-stabilise the global steel business in the coming year may be misplaced, according to industry experts.

The projections increase the chance that Mittal Steel, having launched an Euros 18.6bn (USDollars 22.1bn) takeover bid for rival steel company Arcelor, may be forced in the coming weeks to increase its cash-and-shares offer.

Mike Locker, president of Locker Associates, a US steel consultancy, said: "My view is that the steel business in 2006 will be steady and flat. I think the Chinese government will act to ensure that the risk of overproduction by Chinese mills will be relatively small."

Some worries have been expressed in the past year that output overruns in China - responsible for nearly a third of world steel production - could lead to the country becoming a large net exporter of steel. The extra material entering global markets could depress prices and damage steel industry profitability.

However, forecasts by Meps, a UK steel consultancy, suggest that net exports by China of steel in 2006 will be only 7m tonnes, compared with 0.5m tonnes in 2005. In 2004, China was a net importer of steel of 12.8m tonnes, with imports of 33.2m tonnes and exports of 20.4m tonnes.

Peter Fish, managing director of Meps, said : "The picture for 2006 that we are seeing for the steel industry is rather benign and not particular exciting, but this is positive from the point of view of the steel industry which is not helped by large swings in prices and supply-and-demand conditions."

Luxembourg-based Arcelor is fighting the unsolicited offer by Mittal, headed by Indian billionaire Lakshmi Mittal, on the grounds that the bid both undervalues Arcelor and does not follow industrial logic.

Perceptions that the steel business is entering a fairly calm period, with relatively few risks of a sudden fall in prices, may help to maintain investors' thinking that the current high valuations for steel companies globally are justified by fundamental economics.

Some steel industry onlookers believe Mittal might need to raise its bid - or increase the amount of cash in the offer - to improve its chance of winning over Arcelor shareholders. Mr Mittal has said Mittal has no plans to increase its bid.

This week both companies are announcing their financial results for 2005. On Wednesday Mittal, created in its current form from a previous merger only one year ago, is expected by analysts to announce pre-tax profits of some Dollars 4.6bn on sales of Dollars 28.8bn.

The following day Arcelor is thought likely to announce pre-tax profits of Euros 4.3bn, up from Euros 3bn in 2004, on sales of Euros 32.3bn.

According to projections by Meps, average world steel prices will fall only marginally from Dollars 549 a tonne to Dollars 542 a tonne by January 2007.
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Here are the actual prices for 2006 courtesy of MEPS:

World Steel Prices US $/tonne	Hot Rolled Steel Coil	Hot Rolled Steel Plate	Cold Rolled Steel Coil	Steel Wire Rod	Medium Steel Sections
Jan 2006	510	649	613	446	602
Feb 2006	503	646	607	447	602
Mar 2006	516	651	620	462	612
Apr 2006	538	670	636	480	631
May 2006	569	717	668	495	666
Jun 2006	599	741	703	513	685
Jul 2006	597	736	702	517	703
Aug 2006	599	737	704	519	705
Sep 2006	591	755	691	521	716
Oct 2006	569	740	664	507	701
Nov 2006	560	743	658	501	718