Reuters reported that any revival in demand for steel in 2009 will be sluggish at best and may not become strong until 2012.

Mr Gavin Montgomery steel analyst for CRU in London told Institute for Scrap Recycling Industries convention that "Price falls and producer margins are seen coming under increasing pressure around mid year. Conditions could become so severe that we could see permanent removal of steel making capacity in some higher cost areas."

CRU expected global demand for steel sheet products to fall by 22% in 2009 to 300 million tonnes from 380 million tonnes in 2008 and well off 2007 peak levels of 390 million.

Mr Montgomery predicted that absolute consumption levels will not return to 2007 and 2008 levels until 2012 and in some markets not within CRU's 5 year forecast horizon. He added that "Any upturn in price will be limited as demand recovery is expected to be quite gradual and overcapacity is a problem throughout the industry."

Mr Chuck Bradford of Bradford Research Inc forecast prolonged, sluggish growth beginning later in 2009 or 2010. He said that he was looking for an inventory pick-up, or at least a lack of steel inventory reduction, over the next few months.

Mr Bradford called Ford's announcement that it will build 25% more cars in the second quarter because it had worked down inventories from 120 days to 80 days one of the best signs of recovery. He added that it will take longer for General Motors to work off its substantial inventory overhang, which remained at 120 days worth of vehicles as of April 1st 2009.

He also said that some steel service centers had worked down inventories, though their average shipping rates would likely remain closer to the slower pace in fourth quarter of 2008.

(Sourced from Reuters)