Posted on 29 Mar 2012
South Korea's Hyundai Steel expects the steel market to recover in the second half of this year led by a pickup in automobiles and construction despite high oil prices, weak Chinese demand and euro zone debt issues, executives said.
Ham Young-chul, marketing director of Hyundai Steel, told the Reuters Mining and Metals Summit on Thursday seasonal demand would help the market bottom out after the first quarter and expected repair works in Japan after last year's deadly quake will also support steel consumption.
"Overall demand after winter seems to rise, helping market prices bottom out this quarter, and the index in the construction sectors is showing some recovery," Ham said.
"It will take some time to feel an actual recovery in the market, probably in the second half of this year," he said. "Demand in the automotive sectors is expected to rise by 600,000-700,000 metric tons year-on-year."
Steelmakers across Asia and Europe have curbed production in recent months as a slowing global economy dented demand and slashed steel prices.
Concerns that demand for steel could slow in China, the world's top consumer of the metal, rose after it trimmed its 2012 gross domestic product (GDP) growth target to an eight-year low of 7.5 percent this month.
Ham said Hyundai Steel's sales this year are expected to be led by solid demand from the automotive sector.
He said Hyundai Steel, which plans to maintain its operation rate at full capacity, aimed to produce a combined 16.5 million metric tons of crude steel and steel products this year, up from last year's 16.2 million metric tons.
South Korea's second-largest steelmaker, a unit of Hyundai Motor Group, would provide 3 million metric tons of steel this year to the group's Hyundai Motor and Kia Motors compared with 2.4 million metric tons last year, he said.
The world's fifth-largest automakers aim to boost global vehicle sales by 6 percent this year to a combined 7 million vehicles.
LOWERING PRICE DISCOUNTS
As the market bottoms out, Hyundai Steel is considering reducing domestic market price discounts on hot-rolled coil by 20,000-30,000 won ($17.62-$26.42) per metric ton in April, after an identical cut in February, Ham added.
POSCO, the world's third-largest steelmaker, also said on Wednesday it saw the market bottoming out this quarter, and was considering reducing price discounts.
Hyundai Steel director for raw materials procurement, Shim Sang-cheol, told the summit prices of iron ore and coking coal were expected to remain steady or weak for some time, mainly due to tepid Chinese demand.
"We are trying to carry light inventory, equivalent to one month of consumption, and increasing spot purchases as prices of raw materials are unlikely to rise," Shim said.
Hyundai Steel agreed on iron ore contracts of $130 per metric ton with two major miners for April-June imports, down from $144 per metric ton for January-March, according to company data.
