MUMBAI (Commodity Online): Even as the world is recovering from the recession impact, global steel market is witnessing a surge in demand and 2010 is all set to give a big boost to the iron ore and steel industries of the world.
According to analysts, global economic recovery is expected to lead to improvement in steel demand from key consuming industries like automotives and construction, supported by the ongoing impact of government stimulus spending and restocking of inventories.
Global steel demand is expected to increase 9.2% y-o-y to 1,206 million tonne in 2010. Around 98% of global iron ore demand comes from the steel industry.
In 2009, China tried its level best to bring down the prices during the iron ore price negotiations. But that may not work this year.
Steel industry is on a recovery path with demand rising from every corner. China and India are the two main powers that push the steel demand across the world.
World will return to production growth over the next three months and most likely in the first quarter of 2010. Korean and Indian steel consumption demand has also been rising strongly.
Stainless steel demand is set to grow by 5.5% a year by 2020. As expected, lower levels of around Rs 20900/Mt, have enticed buyers in to the counter leading it to gain appreciably last month.
Indian steel prices are set to move up in 2010, after sliding nearly a fifth year-on-year, sparked by a global demand recovery, but the 2008 peak looks distant.
Key raw materials iron ore and coking coal have also risen 65-70% from their 2009 lows, prompting price hikes globally while local players will also hike rates by 5-7% in January as demand grows.
Currently, Indian steel is quoting at Rs 35,290 a tonne. Consumption in the world’s second fastest growing major economy is set to rise over 12% compared with global usage of 9.2%.
India this year extended fiscal stimulus packages to various sectors including infrastructure, real estate, auto and made credit easier to farmers to wriggle out of an economic slowdown.
While steel makers posted losses or poor profit growth in the first half of 2009 on inflating input costs, peaking interest rates and slumping demand, they turned to profit in the later half as government initiatives ensured a demand revival.
However, analysts do not expect prices to touch the 2008 peak as input costs then were abnormally higher pushing rates up and with imports seen as a major threat.