LKAB has announce that demand for steel in Europe remains low and steel producers are still producing at reduced capacity, while contending with poor profitability and overcapacity. This uncertainty is caused by continued weak confidence in economic growth in Europe and the debt crisis.

Although, steel prices in the EU rose temporarily in the spring, demand for steel remains weak. Consumption by endusers has not increased significantly and new orders are at a low level with short lead times. Combined with a seasonal decline in steel consumption during the summer months, this has meant that demand for iron ore has been limited.

Slower growth in China has led to reduced demand for steel. A reduction in steel production and steelmakers stock reductions of iron ore have curbed global sales of iron ore. Large quantities of iron ore have also been forced onto the spot market when banks forced traders to sell in order to pay off loans with devalued steel stocks as collateral.

In China, this caused at least temporary an oversupply, causing the price on the spot market to fall sharply from mid July until early September, when prices began to rise slightly. The recent price recovery is due to a bolstering of the market’s confidence caused by China’s announcement in early September of major investments in infrastructure projects. Shortly thereafter the US Federal Reserve announced that they planned to start a new round of support purchases of fixed income securities, which also raised market confidence.

There is a shortage of steel in the Middle East relative to the region’s growth, which boosts local steel production and means higher capacity utilization in the steel industry. Lately, cheap Chinese steel imports have upset prices in countries that have low import tariffs for steel.

The DRI market is expected to continue growing in the MENA region with increased demand for high quality DR pellets.

Decreased activity globally in the building and construction sector affects sales in the Minerals Division directly and indirectly. For the entire operation, expectations are for the fourth quarter to remain stable but with lower sales than last year. Market prices for most minerals are relatively unchanged except for iron ore, for which prices have followed developments in other markets.

Source - LKAB

(www.steelguru.com)