ArcelorMittal US sees China key to steel recovery
NEW YORK, June 23 (Reuters) - ArcelorMittal (ISPA.AS), the world's largest steelmaker, sees recovery in world steel demand as largely dependent on China and emerging markets, like Brazil, where growth has already begun.
"At least from our experience, Brazil is recovering relatively rapidly, in comparison to North America," Lou Schorsch, chief executive officer of the company's Flat Americas division told the Steel Survival Strategies conference on Tuesday.
The conference was organized by the American Metal Market.
Though Brazil's first quarter demand for sheet steel fell 45 percent versus the 2008 quarter, he pointed out that May auto sales were 2 percent higher than May 2008 in Brazil.
He said the ArcelorMittal division expects its Brazilian flat-rolled operations to be at full capacity by the end of third quarter, taking into account a temporary capacity reduction related to the repair of a small blast furnace.
Schorsch said he expects those repairs to be completed in first quarter of next year.
Among large consuming countries, China alone showed steel demand growth in the first quarter, increasing by 7 percent year-on-year.
"The enormous continued growth in China's steel demand has a tremendous positive impact on the global industry," he said.
First quarter global steel demand fell 40 percent year-on-year, and is still falling in developed countries.
Declines were sharpest in the U.S. and the European Union, where demand fell 49 percent and 43 percent, respectively, in the first quarter compared with 2008.
Even with a depressed outlook for steel demand in the developed world, global demand is expected to fall only 10 percent in 2009, mitigated by China's continued growth and Brazil's rapid recovery outlook.
Steel markets in China should grow by 4 percent in 2009, due to the positive impact of the government's stimulus plan and increased state lending, Schorsch said.
Recovery will be more drawn out in the developed world, he said.
In the U.S., service center inventories for flat steel products have tumbled to their lowest levels since the early 1980s. The adjustment in Europe has lagged somewhat, but is still fairly evident since last Fall, the branch CEO said.
Last month, service center inventories fell another 9 percent in the U.S. to 2.5 months worth of material on hand at current "extremely depressed" shipment levels.
Service centers take steel from producers, turn it into intermediate shapes and send it to customers such as automakers or appliance makers.
"Even though service center shipments fell in May, suggesting we are not out of the woods yet, we can be fairly sure the second quarter represents a bottom," he said, adding that the North American inventory adjustment for flat steel products "is more or less complete."
In Europe, service center inventories are still high though down from last October's strong levels.
As a result of these inventory movements, he said, substantial improvement in operating rates is almost certain in the very near term in North America and by the Fall in Europe.
"Even with no increase in the currently low shipment levels from service centers, the end of their inventory liquidation alone represents almost 10 points in operating rate for the U.S. industry. This will be a major improvement," the steel industry executive said.
But, he said, full recovery requires a strong rebound in end-user demand and not just an end to inventory liquidation. (Reporting by Carole Vaporean, Editing by Carol Bishopric)
