Stemcor: no recovery in steel demand growth until last quarter of 2009

Steel demand looks grim until late 2009, according to Stemcor. by Humeyra Pamuk
The world's largest independent steel trader Stemcor does not expect a recovery in steel demand growth until the last quarter of next year, its chairman said. "Underlying demand and real consumption are very weak and weakening," Ralph Oppenheimer, chairman of UK-based Stemcor, which trades around 20 million tonnes of steel and steel products annually, told Reuters in an interview late on Tuesday. "Orders have fallen around 70-80 percent in the last four months," Oppenheimer said on the sidelines of a Metal Bulletin steel conference in Paris. A leading German steel and metals trader told Reuters at the Paris conference on Tuesday that steel prices could rebound by the end of the first quarter of 2009. Deteriorating demand in major steel consuming industries such as automotives and construction have forced steelmakers to cut back production sharply, but prices remain under pressure. "There has been the most abrupt and sudden collapse of prices that the steel industry has ever seen," Oppenheimer said, but added there was a brief recovery in November. "There was an upturn in scrap and scrap related products like billet and rebar," he said, referring to semi-finished long steel products used in construction sector. Prices rose after Turkish stockists came back to the market to renew their depleted stocks, but the rally quickly ran out of steam due to lack of real demand. "We now have a slight weakness again," Oppenheimer said. "It was two steps forward and one step back and we expect to see that again in December, January." That was only a technical rebound after a period of low prices, he said, adding he did not expect a sustainable recovery until late 2009. "We don't see any real growth in steel demand until the fourth quarter of 2009, more likely towards the end of the quarter," he said. In terms of credit, banks were still supportive as most of traders' credit lines were transactional - short term - rather than long-term structured loans, which Oppenheimer said was difficult to obtain at the moment. "Steel industry relies on longer term loans for investment but for trading purposes it is more asset-based transactions, so traders are still able to access credit lines," he said. But tightening credit markets have dried up funding for the steel industry, where most construction and infrastructure projects are financed by banking facilities. "If you want to build a steel works with 5-6 year-loans banks are running away from that," Oppenheimer said.