ANALYSIS-Steel industry rekindles, full recovery months off
* Steel prices in Europe, U.S. rise as orders tick higher
* ArcelorMittal plans to resume some idled capacity
* Overcapacity threatens sustainable price hike
LONDON, July 2 (Reuters) - Steel order books in Europe and the United States have improved over the past month, prompting producers to restart some idled capacity, but full recovery is some months away because real demand remains depressed.
Behind the uptick in orders is the fact that destocking in the United States has finished and in Europe is coming to an end, which analysts say is the reason for higher steel prices and resumption of output.
ArcelorMittal (ISPA.AS), the world's largest steelmaker, last week said it was planning to restart some of its idled capacity in the United States and Brazil. U.S. Steel Corp (X.N) also signalled that it was about to bring back some capacity. [nN23472445] [nN2371594]
However, analysts and producers say the light at the end of the tunnel is still dim and although the worst seems to be over, the road to recovery is set to be rocky.
"Green shoots seems to be the phrase but it's hard to believe that we're really seeing a sustainable uptake in demand," said John Lichtenstein, global leader of steel at consultancy firm Accenture.
"The risk is that increased production on the part of multiple producers will overwhelm the real demand increase, thereby putting renewed pressure on prices," he said. Germany's top producer Thyssenkrupp (TKAG.DE) said this week that it raised its prices from July 1 while industry sources said Europe's second biggest steelmaker Corus was about to increase its prices too. [nN23472445] [nWEA9109]
Global steel prices have tumbled more than 70 percent in some regions since hitting a peak in mid-2008, as a global economic downturn depressed demand in key consuming industries such as construction and automotives.
Currently domestic hot-rolled coil (HRC) prices in Europe are at about 375 euros per tonne, with another 30 euros increase expected. It was 360 euros a month ago.
In long products, billet prices in the Black Sea region have risen to around $410-415 a tonne, compared with around $350 a tonne about a month ago.
PLATEAU
The industry expects a slow, prolonged recovery, with production not reaching the levels seen in peak years, like 2007, before 2011 or even beyond. Continued...
