"In real estate they say the three key dynamics are location, location and location. But for our steel market today, it comes down to demand, demand and demand, or better said, lack of it." This comment was made by one of the US industry's veteran traders, John Foster, COO of Coutinho & Ferrostaal, at the SteelOrbis Spring '09 Conference & 60th IREPAS meeting in Athens. One primary objective at the current time is to avoid focusing on the dismal past of the last six-to-eight months, Mr. Foster said, adding that not all has been negative of late and that he perceives some light at the end of tunnel. Mr. Foster also said that the latest GDP figures as published by the Wall Street Journal predict at least some modest recovery in Q3 this year with Q4 going even more positive in the US.
From the steel perspective, it is generally accepted that there will be a minimum of nine months between the approval of the US stimulus package by Congress and its direct impact on the industry. Using the regularly reported figure of about ten percent of the $800 billion going to infrastructure projects, traders have attempted to estimate what this could mean in tons of steel. According to one calculation, there will be roughly $3.2 billion in steel-related expenditures. Further assuming an $880/mt average market value of the steel procured, one could then anticipate about 4 million tons of steel dedicated for this program over the predicted 18-24 month time span. In short, the industry needs fundamental demand to return for a real turnaround, be it domestic or even globally via exports. (2008 was a record year for US steel exports at 13 million tons, and no doubt this has been helped by the weakened US dollar. John Foster also compared the Great Depression figures to the latest recession figures and said that the US is not at Great Depression levels nor does anyone of merit say it will get there.
Mr. John Foster closed his presentation saying the current market is in a condition of disarray today but remains absolutely a work in progress. When faced with such a sharp and sudden decline in the global markets, it is sometimes best to focus upon the immediate path rather that the declining slope that lead us to the trough's bottom; that is if we can agree a bottom has been reached.