The proof that the world has more steel capacity than demand is in many mills idling large capacity. Production in the developed world is yet to be back to the pre-crisis level. World capacity use has remained a tad higher than 80 per cent, mainly due to good show in Asia and the West Asia. The industry has made much progress over the corresponding time of 2009 when governments around the world in their battle against a crippling recession put in place massive fiscal stimulus programmes.
Caparo chairman Lord Swaraj Paul says nobody at this point will give a clean bill of health to the world’s major economies which are on a recovery struggle from the deepest recession since the Great Depression. Lord Paul’s uneasiness about the state of the economy is because the fear of a double deep recession remains much in the air as consumer confidence in many countries in the West is coming close to credit crisis levels.
In any case when it comes to economic forecasting there cannot be any Oracle of Delphi. As for steel, Lord Paul citing the example of Caparo’s buying of the metal in the US and Europe says, “When so much capacity is idle, steelmakers will have to live with a buyer’s market. Nobody wants to switch off a blast furnace. So you always find rivals in the steel industry betraying desperation to get business.” Not many experts are, therefore, hopeful of any strong steel price revival in the remaining two quarters of 2010.
Source: Business Standard – India
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