drop in io demand is good for umc, page-13

STEEL MARKET WOES DUE TO FALLING DEMAND, SAY FINANCIERS

The decline in steel prices is largely because of falling consumption, which has been exacerbated by bearish GDP forecasts and diminishing consumer confidence, say European trading and bank sources contacted by Steel Business Briefing. Greater restrictions by the banks on providing trade finance have not impacted the market so far, even if individual businesses might be feeling the pinch, they add.

“Steel prices have now fallen such a long way that the working capital requirements for many businesses have reduced considerably,” says a London source. But, there are signs the global financial crisis is beginning to hit steel trade in terms of credit finance, adds one large player.

A number of banks are pulling out of trade finance, like Hamburg-based HSH Nordbank a few weeks ago, leaving the rest to spread their credit more thinly, he adds. “It’s possible more will go.” The future of the business at Fortis – the second largest trade finance bank, is uncertain following its acquisition last month by BNP, he adds.

A banker, recently in the Middle East, paints a gloomier picture. Some companies there, who used their steel stocks to secure new finance, are now having to sell off this collateral, he says, even if there is no market. Traders in Dubai are liquidating huge, inventories for long products at below the cost of production, he adds.

"It’s because the market disappeared overnight," sources say. “We all saw a correction coming,” because steel is cyclical and quarter four is known for destocking. But, it turned into a collapse when the banks stopped funding the large projects, and "the little guy stopped buying cars and fridges".
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More than a third of NA blast furnaces could be idled

Tuesday, 04 November 2008

Market observers believe more than a third of some 30 previously operating blast furnaces in the US and Canada have been idled or will be idled as a result of falling demand and the global financial crisis.

Steel Business Briefing confirmed 10 BF idlings, and market sources reported several more that could not be confirmed.

US raw steel production has declined for 11 consecutive weeks, falling 26% from mid-August to 1.61m short tons last week. US mills produce a little more than 2m t/w under normal market conditions, and up to 2.1m t/w or more during strong markets.

While confirming that they are making cutbacks or will make cutbacks in response to market conditions, many NA mills will not discuss specifics. Instead, market observers are piecing together their own knowledge and reports from outside sources, including local newspapers and trade journals like SBB, to get a look at the big picture.

Observers believe that at this point in the steel market slump, production cutbacks are the only way to stabilize market prices that have been falling since June and in disarray since September. "It's pretty bad out there," says one buyer.