Steel industry set to recover on increasing demand

Steel industry set to recover on increasing demand. Revenues of steelmakers could reach pre-crisis levels this year on the back of a recovery in heavy industries, experts said. According to the World Steel Association, global steel demand is expected to grow 9.2 percent to 1.25 billion tons in 2010 from an 8.6 percent contraction in 2009. The anticipated recovery will be buttressed by strong growth in steel demand from China, the association said. China will continue to see steel demand rise by 5 percent in 2010 from a 19 percent rebound in 2009, while demand from emerging economies will grow 12 percent in 2010 from a 17 percent fall in 2009, it said. Steel demand in Korea is likely to grow more than 10 percent in 2010 from a year earlier, according to industry reports and analysts. The Korea Iron & Steel Association said steel demand in Korea is expected to rise 12.2 percent to 51.4 million tons this year. Chang Lee, an analyst with Woori Investment & Securities, said the Korean steel industry's recovery will be bolstered by economic growth, steel price hikes and an easing of the global supply glut. "Steel prices are expected to start to rising in April, as iron ore and coal prices will start to rise around that time," Lee said. "As raw material costs rise, steelmakers will accordingly raise their product prices," he said. Lee added that the Chinese government's industrial policy to restrict excessive supply of steel will reduce the global supply glut and help Korean steelmakers compete better. Samsung Securities analysts Kim Kyoung-jung forecast a brighter outlook for the local steel industry, saying local steel demand would grow 15 percent. Kim said, however, that local steelmakers would face several challenges, which may temper the recovery. "Korean steelmakers will face more severe price competition if raw material prices rise. Also, they will have to figure out how to secure raw materials more stably," Kim said. "With Hyundai Steel producing hot-rolled steel from January this year, competition between POSCO, Hyundai Steel and Dongbu Steel will get tougher as well," he said. With steel demand rising, local steelmakers are expected to aggressively expand their output this year. POSCO, the world's fourth-largest steelmaker and the nation's leading steelmaker, aims to become a comprehensive materials business provider by expanding business lines into eco-friendly businesses, resource development and energy, POSCO CEO Chung Joon-yang said on Monday. At the same time, POSCO will boost overseas resource development and investment, he said. The company is expected to start building an integrated mill in Indonesia and India soon, analyst Lee noted. "While other global steelmakers hesitate to make further investments, POSCO's expansion in overseas markets will bring a large impact on the global steel industry," Lee said. Hyundai Steel, the No. 2 steelmaker in Korea, launched its first blast furnace on Tuesday, which has an annual capacity of 4 million tons of hot-rolled steel for car making and steel plates for shipbuilding. The company plans to complete its second blast furnace by early next year to reach annual capacity of 8 million tons, Hyundai officials said. Dongbu Steel, which launched its electric arc furnace mill in Dangjin in July last year, aims to increase capacity to 2.5 million tons this year from 300,000 tons of hot-rolled steel, the company said. Samsung's Kim noted that local steelmakers will have to prepare eco-friendly business strategies in earnest, to cope with the government's commitment to cut CO2 emissions by 4 percent by 2020 from the level of 2005.