At Session One of the SteelOrbis Fall '08 Conference & 59th IREPAS meeting held in Hamburg, Germany this week, aptly named "Markets in Turmoil", Grupo CELSA's International Sales Director Kim Marti Subirina presented data on the current global market and macro-economic situation, which, he said, show a "light at the end of the tunnel" for the current market weakness.
First, Mr. Subirina presented figures illustrating the current macroeconomic situation. GDP data for different areas of the world, compiled from The Economist, World Bank, European Central Bank, show that while the GDP of most regions will decrease in 2008, the following years are expected to show a rebound, with developing countries continuing to contribute tremendously to the world GDP growth. Subirina presented data from the IMF showing that world GDP growth in 2008 is expected to decrease to 2.7 percent, compared to 3.7 percent in 2007. In 2009, world GDP growth will fall further, to 1.9 percent. However, it is projected to increase to 3.2 percent in 2010 and to 5.2 percent in 2011.
In addition to the projected positive world economic growth, particularly in the developing countries, data on world steel consumption is also projected to grow going forward, Subirina said. World finished steel consumption is expected to show positive growth in 2008 compared to 2007, though the growth will be at a slower pace (three percent) than in 2006 and 2007 (eight percent). Steel consumption from China, based on worldsteel data from Spring 2007, has grown at the fastest pace compared to any other country or region since the year 2000. The pace of China's steel consumption is indeed slowing, Subirina said, but it is still has the fastest-growing steel consumption compared to any other country or region. Steel consumption in India, South America and Russia is also showing strong upward movement, Subirina's slides showed.
Subirina then turned his focus to long products. Longs consumption in 2008 compared to 2007 is estimated to be flat to slightly down in most regions of the world, except for in East and Southeast Asia, where longs consumption is projected to rise from 327 million mt in 2007 to 369 million mt in 2008, he said. World rebar consumption in 2008 is estimated to grow slightly from 2007, from 220 million mt to 222 million mt, with 59 percent of consumption coming from East and Southeast Asia.
Although international longs prices have shown showed sharp decreases from their peak in 2007, Subirina believes that the market is very close to bottoming out. Subirina concluded his presentation with some rather optimistic predictions. He expects that the current heavy destocking activity will end shortly, stopping the price correction within a few weeks. Existing real demand will generate a bounce in the market (though the actual level of demand will need to be assessed). He also believes that scrap price levels are close to bottoming out, and that the bank rescue plans and reactivation packages around the world will restore confidence and help recover investments. He ended the presentation with a firmly optimistic conclusion: "The price correction is close to its low."