Global steel outlook said to turn corner

Despite a “very tough” climate and “exceptionally difficult” first quarter, Chinese-led growth in steel production meant “a technical recovery” was inevitable, the ArcelorMittal chairman said.
“The bright skies are starting to appear and even though we should remain cautious, we see the potential for gradual improvement going forward into the second part of the year,” Mr Mittal told a media conference.
ArcelorMittal, one of the world’s largest steel producers, was a prominent defaulter of contracts of affreightment with shipowners in the last quarter of 2008. An undisclosed number of contracts for iron ore and steel shipments were cancelled, with claims lodged against the steel producer in US courts now above  US$100m.
Steel production underpins demand for about half of the world’s bulk carrier fleet, transporting iron ore and coal.
Mr Mittal said ArcelorMittal was “in the midst of the deepest and most synchronised recession in our lifetimes”, as it reported a US$1.1bn net quarterly loss and maintained “extremely painful” steel production cuts of up to 50%.
“Yet we are seeing some signs that things are slowly beginning to turn the corner,” Mr Mittal said, citing Chinese bank lending, credit markets recovery and unsustainably low levels of steel inventories in western countries.
Steel shipments were down 6% on the previous quarter, to 16m tonnes, while sales fell 32% to US$15.1bn.
ArcelorMittal said it would cut more than US$7.5bn in costs by mid-2009.
But while Mr Mittal was positive about a boost in construction and hence long product demand in the Middle East, he was most bullish on China, saying that since October 2008 apparent domestic steel demand there had recovered by 40%.
Chinese steel mills were now operating at 90% capacity, he said.
“But more importantly, real demand growth [in China] is also accelerating, driven by the high steel-intensive stimulus package and record level of bank lending,” Mr Mittal said.
Global steel production excluding China was expected to be down by 45%, year on year. However, Chinese production would rise by up to 5% in 2009, and was already up 7.1% in the first quarter.
European real demand was forecast to fall 12.6% .
ArcelorMittal said steel demand growth peaked in 2007 and these levels “won’t be seen for another four years”.