Stainless steel makers unsure on outlook 

(MENAFN - Arab News) The International Stainless Steel Forum is so unsure about the sector's short-term growth outlook, in view of a fragile economy and overcapacity notably in China, that the industry body has chosen not to issue any output or demand forecast for this year.

After a 25 percent stainless steel production jump in 2010 and a 3 percent increase in 2011 it is not clear whether the industry will grow this year, Francois Payet-Gaspard, secretary general of the body grouping global stainless steel makers, said.

"We are neither positive nor negative: we are very cautious," Payet-Gaspard said on the sidelines of a conference in Rome organized by the Bureau of International Recycling.

"We do believe that stainless steel will continue to grow at 5-6 percent a year in the long term but in the very short term the picture is very, very uncertain," he said.

The ISSF says it comprises 72 company and affiliated members in 27 countries and jointly they produced 75 to 80 percent of all stainless steel manufactured in 2009.

Overcapacity has become a major problem even in top producer China, which has propelled demand growth in the last 10 years.
"Generally China drives global growth and makes up for lower growth in other regions too, but this year the situation in Asia is uncertain too," Payet-Gaspard said.

"There is overcapacity in Europe and in Asia, especially in China."
China's high growth rates in the last decade led it to spend on capacity expansion to keep up with the swelling demand but it invested more than necessary.

Competition between regions or between local political entities to invest in new capacity is one reason why the production rose out of control, Payet-Gaspard said.

Closing small inefficient plants in China is problematic because they are often in areas of low employment and there is social pressure to keep them operating, he added.

Europe also suffers of overproduction but the projected acquisition of German company ThyssenKrupp's Inoxum by Finland's Outokumpu would have a positive effect if allowed by the European Commission, Payet-Gaspard said.

The resulting new company would cut two steel shops or almost two million tons of capacity.

Although the two companies together have a market share of about 60 percent in some segments, the European Commission, which acts as a competition watchdog, should take into account the increasing share of imports and the weak state of the industry in Europe, analysts said.

Payet-Gaspard said the commission could allow the acquisition while possibly imposing some "remedies," obliging Outokumpu to sell some assets to protect competition.