World can make more steel than it needs
By Peter F Marcus -- Purchasing, 3/11/1999
After falling 2.3% last year, world steel consumption will probably fall another 1.5% this year to 755 million metric tonnes. And, with an estimated 21 million tonnes of steel stockpiled worldwide, production will slide 4.7% this year to 739 million tonnes. As world economies improve in 2000, and stocks are reduced, production will rise to 779 million tonnes to support 775 million tonnes of consumption.Better demand ahead, however, does not address the world's capacity excess. At mid-1998, "engineered capacity" was around 1.015 billion tonnes. While today's low steel prices may work to take out some inefficient steelmaking capacity, new mills have been added and a number of factors have boosted "effective capacity" at existing plants to almost 860 million tons. These include:
* Increased use of computers in processing of steel, making steel plants more reliable.
* A sharp increase in the number of ladle metallurgy furnaces, boosting the tonnage of usable steel per heat.
* The advent of new-technology thin-slab/sheet mills which are often able to operate at higher-than-rated capacity.
* Worldwide debottlenecking of steelmaking facilities (as some plants have been downsized and or rationalized, productivity at remaining plants has increased).
Problem for the world steel industry is that it operated in 1998 at around 85% of engineered capacity. This figure needs to be at 90% or higher for the world industry to be truly profitable. And, since capacity is related to price, an extended period of low world export prices could trigger further shutdowns of inefficient and/or aged capacity.
Peter F. Marcus, managing partner of World Steel Dynamics Inc. in Englewood Cliffs, N.J., is a metals consultant and founder of various metals data services.
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