Macquarie at IREPAS: The market sentiment in China is holding up
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At the SteelOrbis Spring '12 Conference and 66th IREPAS Meeting held in London, Colin Hamilton from Macquarie Capital (Europe) Limited said that according to China steel survey conducted by Macquarie Capital, the market sentiment is holding up, with the outlook remaining positive after a difficult February, helped by improving conditions in March. In China, traders registered a significant month-on-month change in orders and Chinese mills also saw improvement, although less dramatic. Improvement has come across most end use sectors, with biggest change has been construction and infrastructure. According to Mr. Hamilton, profitability is creeping back into the sector, although there are regional variations, with mills in Northern China more profitable.
Hamilton said that due to high trending raw material prices, steel margins are still posing problems for steelmakers and conversion margins remain pretty slim for rebar. Small Chinese mills have adapted much better to operating as cyclical, low margin converters with iron ore prices reacting to the change in futures prices. Stating that Chinese steel output shows swings which are big even in a global context Mr. Hamilton forecasted that there is still plenty of growth expected in China, with productivity contributing more and property less over time.
Presenting Macquarie steel production forecasts, Hamilton stated that world crude steel production is expected to reach 1.56 billion, up from 1.52 billion mt in 2011, whereas the Chinese crude steel production is expected to total 732 million mt this year, increasing from 694 million mt in 2011. Crude steel production of developed countries is predicted to remain steady, showing miniscule growth in the years to come until 2016, while the crude steel production of emerging markets are anticipated to reach 591 million mt by the year 2016, rising from 477 million mt in 2011. The Chinese crude steel production, on the other hand is expected to total 850 million mt in 2016.