We expect world crude steel production to expand by 6.8 percent this year – up by 76.5 million tonnes on the outturn in 2004. This figure represents a decline in the rate of growth in output during the second half as demand from customers in many parts of the globe continues to decrease.
The inventory building phase is complete. We are now in a stock drawdown situation. Prices for most steel products have collapsed due to over supply. Further reductions are inevitable until supply and demand move nearer into balance.
A number of mills have already announced action to curtail supply. Unfortunately, significant amounts of new capacity have come on stream recently. Steel producers are always reluctant to curb output just at the time they had planned to benefit from increased tonnage.
North American steel manufacturing is starting to slip. Customer demand is sluggish. The mini mills have short delivery lead times due to lack of orders, resulting from the excessive inventories built up by customers over the last nine months. The second half of this year will be a difficult time for the steel makers. We forecast total output for the year falling to around 130 million tonnes – down 3 million tonnes on the year earlier figure.