Steel Business Briefing, Thursday, 04 November 2010

Despite the UK steel industry suffering from weak demand and a "pedestrian" recovery, the broader economic picture is encouraging, local market sources tell Steel Business Briefing.

"Every fourth quarter we go into a seasonal downturn. I think there's a lot of negativity out there at the moment in terms of demand," says Laurence McDougall, outgoing chairman of the North East Association of Steel Stockholders (NEASS). "But the macroeconomic picture is very strong. The volume of steel in the supply chain is very low and iron ore and scrap prices are going to rise," he adds.

"Globally the recovery has happened. We're now way beyond where the 2007 level of demand was, and that should have an impact on raw materials prices," adds Richard White, chief executive of the Iron & Steel Statistics Bureau. The pressure on raw material processes should filter through into product prices in the longer-term, sources suggest.

Prices in emerging economies, such as India and China, have been resilient of late despite the slowdown in Europe and other developed regions. And if seaborne iron ore is a good indicator of economic activity and the steel market in general, Chinese demand pushing trade to 1 billion tonnes and upwards is good news.

While this year may end on a relatively muted note, in terms of prices and the UK steel market in general, the first quarter of next year could see an upturn, some sources agree.