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Supply strain on steel

Calcutta, June 30: Is the party over for steel sultans across the world' Nobody is sticking necks out with a definite answer, but the recent trend does not paint a rosy picture for an industry cruising along historic highs until a few months ago.

Consider the facts: China, the largest consumer of steel, is increasingly buying less from the international market while shipping out more of its own products. Steel exports from the country rose a whopping 110 per cent in May.

In the first four months of 2005, imports were 9.1 million tonnes (mt) compared with 16 mt in the same period last year. At the same time, exports zoomed to 11 mt from 2.8 mt same time last year. The glut in the international market due to lower demand has forced leading players like Mittal Steel, Arcelor and Posco into output cuts. After peaking at $750 a tonne, prices have crashed to $500.

Back home, steel majors have reduced prices by Rs 2,000 a tonne over April rates. SAIL today announced cuts of Rs 500-2,000 a tonne across various categories, making it the second successive slash in as many months.

However, the global steel industry is putting up a brave face, saying the slump is a temporary phenomenon. World Steel Dynamics, a leading steel information service, predicts prices will bottom out by the third quarter this year.

Mittal Steel, too, has swatted fears that China would remain a net exporter of steel ' sell more to the world than buy.

“The demand has not slackened, only production has outpaced it. A correction is inevitable,” an industry expert said.

The glut in the domestic as well as international market has been partly caused by users who bought more than their requirements for fear of having to pay ever-rising prices.

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