12th World Steel Conference

CRU's 12th World Steel Conference started in Barcelona on Monday March 6th with the keynote presentation on market trends by Ricardo Hugas, the Group Commercial Director of sponsors CELSA. Mr Hugas told the conference that Brazil, Russia, India and China represent a large source of GDP driven growth in steel demand. He also mentioned that the ongoing consolidations will lead to a stronger industry by offering better control of supply/demand balance which in turn will help build a sustainable industry. However, the unpredictable scrap market will continue to cause cyclical movements according to Mr Hugas, who thinks that the structural tendency of prices will still be an increase as higher energy costs and higher transport costs will force the producers to increase spread. Jose Luis Escriva, the Chief Economist of BBVA Banking Group has said that the world economy is expected to grow by 4% in 2006 with China showing a 9% growth rate whereas USA economy will reduce its growth rate slightly from 3,5% to 3,3% Japanese economy will grow by 3%, EU by 2% and Latin America by 4,1%. According to Mr Escriva, core inflation will remain well contained, and interest rates will rise moderately. Robert Hunter of Midrex has raised some eyebrows by saying it is not true that scrap prices are at an all time high. He told the attendees that the price of scrap has not really increased but instead the value of money has decreased. Emphasizing the already announced new DR capacity projects by Midrex, and also hinting several ongoing negotiations without naming the customers, Mr Hunter said that at least 11 million tons of new DR capacity will be brought on stream between 2006-2008. Of course Chinese and Indian steel industries were major topics of discussion during the first day. India was named as the next growth engine and has been predicted to show a faster pace closing up to Chinese levels in terms of investments in infrastructure given the current state of the country, as well as introducing reforms. Vivek Agarwal of VISA Steel predicted that steel demand growth in India will mostly be met with the domestic production given the fact that current production per capita is extremely low in India, 32 kg compared to China's 260 kg. His production prediction is 65+ million tons for 2012 and 110+ million tons for 2020.