OECD warns of growing risks to global steel market

OECD warns of growing risks to global steel market


New Delhi: The currently strong global steel market is likely to be less buoyant next year due to weaker prospects of global economic growth, a top official of the Organization for Economic Cooperation and Development’s (OECD) steel committee has said.

“While world demand for steel should continue to expand favourably in 2008, growing economic risks associated with housing-market problems cloud the outlook to some extent. Continued capacity expansion observed in various parts of the world could impact on prices if demand growth slows significantly," Risaburo Nezu (Japan), chairman of the committee, said in a meeting in Paris on Tuesday.

The BRIC economies (Brazil, Russia, India and China) are leading the growth of world demand. Chinese steel consumption reached 318 million tonnes in the first nine months of the year, up 30.8 million tonnes, or 10.7%, from the same period last year.

“Steel demand in these economies is expected to continue displaying strong growth in 2008, though some moderation will be felt from the global economic slowdown," Nezu said in a statement.

Indian consumption was also increasing at a double-digit pace, though from a much lower level of around 45 million tonnes.

“In response to growing demand, India may have become a net importer of steel during the course of 2007, he said," he pointed out.

“In India, production figures have been revised upwards, making the country the fifth largest producer in the world in 2006. Indian production continued to increase rapidly this year, driven by strong demand,“ the chairman said.

Global capacity is expected to continue to grow strongly, as some governments have been encouraging investments in the steel industry in order to meet growing infrastructure needs and demand from expanding industrial sectors.

As capacity continues to expand, abrupt slowdowns in world demand have the potential to create trade frictions, to the detriment of the long-term health of the industry, he warned.

“As steel production continues to increase, raw material prices have recently risen to record highs. Despite significant investments to increase production of some raw materials, trade-distorting export restrictions and infrastructure problems in some raw material markets, have the potential to lead to temporary shortages," Nezu pointed out.