Chairman Marti: Fear of oversupply from China justified

Speaking at the opening of the SteelOrbis 2014 Fall Conference & 71st IREPAS meeting in Berlin on September 29, IREPAS chairman Kim Marti stated that the global economy is showing positive signals with 3.3 percent growth expected this year and 4 percent in 2015, adding that the US economy is also accelerating, helping the whole world to grow, especially its neighbors Canada and Central America. Mr. Marti also pointed out that consumer confidence has become stronger in the EU, providing support for economic growth, while stressing that the old fears relating to the EU economy are gone. Marti added that the economy in the Gulf region is indicating a very strong performance, with a lot of projects coming on stream, while economic stability has been restored in Egypt and Iran is benefitting from the easing of sanctions.

The IREPAS chairman stated that overcapacity is still the main problem the steel industry is facing, citing China as the principal source of the overcapacity with new steelmaking capacities coming on stream in the country. Mr. Marti also included the change in the iron ore-scrap price balance, as well as trade barriers and credit restrictions as problems the industry is coping with.

Marti also said that the key risks to the global economy, such as geopolitical tensions including conflicts in Ukraine and in the Africa/MENA region, should be closely monitored. He indicated that the long-term fundamentals for long steel products remain solid, with emerging economies expected to continue to drive long steel product demand, especially in Asia. However, despite demand growth, margins for EAF producers have been squeezed, while iron ore-based producers have been benefiting from relatively low iron ore prices.

Mr. Marti commented on the fear of oversupply from China in the market, stating that it is justified, pointing out that Chinese rebar production totaled almost 220 million mt in 2013. He said that the EU is still facing a period of low consumption compared to 2008-09 and is trying to adapt its production to the market by shutting down excess capacities.

The IREPAS chairman said; global steel consumption grew by 3.1 percent in 2013, confirming its sustained growth since 2009. More than three percent growth is expected in both 2014 and 2015. Global apparent steel finished use is forecast at 1.52 billion mt in 2014, with long steel product consumption this year expected to reach 846 million mt. He went on to say that the Asian markets, which account for more than 70 percent of total long steel product consumption, continue to drive global consumption volumes and growth.

Regarding long steel product consumption in terms of the different products, Kim Marti said that rebar has gained market share and accounts for 43 percent of total long steel product consumption, with wire rod accounting for 27 percent, merchant bar for 24 percent, and sections for six percent. Overall annual growth in rebar consumption in 2014 is foreseen to reach 5.3 percent, with significant strength in North America (with a predicted rise of 7.8 percent) and signs of recovery in the EU (with an anticipated 5.9 percent increase in rebar consumption for the full year). Mr. Marti affirmed that the developing economies are driving global rebar consumption, with China accounting for 55 percent of total consumption.

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