When will steel reduction plans begin to work? Go back Before the recent financial storm, most market analysts had expected the steel market to look positive in the fourth quarter of 2008; however, the serious global financial problems have forced them to adjust their forecast downwards regarding the future steel market. Although the steel price had reached its highest level in early July, it then plunged. Most steelmakers at first believed that it would only be a short term correction. However, the breaking global economic crisis raised doubts in people’s minds regarding the future steel market situation. Their question now is: “When will the steel market awaken?” And the answer could depend upon the amount of time that it will take for the reductions in steel production to finally affect the market.” Since the end of August, some steelmakers have considered cutting their production; however, the real reduction plan was only executed this September by the scheduling of annual maintenance. US steelmakers may have been the first to execute steel product reduction. In mid September, Severstal Wheeling Inc.

announced that it would delay its scheduling for the restarting of the repaired and modernized No.5 facilities in Mingo Junction until the end of 2008, depending on the market situation. Also, ArcelorMittal US announced that it would close its D Furnace, located in Burns Harbor, for 75 days starting from September 25th, 2008. US Steel planned to have its equipment undergo their annual maintenance at its Mon Valley Works, Granite City Works and Gary Works around this October and November. Most US steel service centers believe that the steel reduction plan will be very helpful in keeping the steel price stable in the fourth quarter of 2008. In Europe, Duferco’s La Louviere hot roll steel plant, located in Belgium, is going to close for about 10 to 12 days this October. On the other hand, Alcelormittal said that considering the slow market demand in Western Europe and the United States, the company has decided to reduce its steel production by a maximum of 15 percent in the fourth quarter. In CIS, some steel rebar and wire suppliers in Ukraine and Russia have also cut their production of steel long products and arranged for their annual equipment maintenance plan. In terms of Asia, Posco and Japan’s NSSC continued their stainless steel reduction plan. Taiwan’s and China’s steel mills have also cut carbon steel production in the fourth quarter. In China, Baosteel had already cut steel production, in a rather stealthy manner. Also, Wusco already undertook its annual maintenance on its cold roll steel production line in the middle of September.

In Taiwan, because of weakening steel long product demand, Feng Hsin Iron and Steel planned to reduce long steel production in the fourth quarter. Although the precise figure was not disclosed, some said that it might be about 10~20 percent. For steel flat product, China Steel Corp. (CSC) announced that it would reduce its fourth quarter hot roll steel supply quantity by about 5 to 10 percent starting at the end of August; also CSC Group’s Chung Hung Steel has continued its policy of reducing steel supply quantity by 30 percent in October. Also, Yieh Phui and Sysco will arrange their schedules as well to reduce production. Basically, since September, global steel mills have taken serious steps regarding steel reduction plans.

However, the major question remains: When will these reduction plans have their effect? With the backdrop of this financial crisis, most global steel mills have just started their reduction plans, so some optimistic market analysts are forecasting a rebound around the end of November or in early December. Besides, since current prices are similar to those at the beginning of this year, the steel market is not as pessimistic as had been imagined. On one hand, no matter how, most global steel mills have started their steel reduction plans to avoid prices from dropping further, and on the other hand, buyers will run through their inventory sooner or later. By the first quarter of 2009, the steel market situation should have noticeably improved over the Q3 and early Q4 of 2008.