Asian steelmakers to cut steel output next month

Short-term dip does not deter long-term steelmaking capacity expansion plans

By Purchasing Staff -- Purchasing, 8/29/2007 11:24:00 AM

Asia’s third-largest steelmaker Posco of Korea said it will be reducing output of stainless steel by 25,000 tons in September due to declining orders.

According to a Bloomberg report, the decline in orders comes not due to a long-term demand decline, but rather because steel buyers are hoping that decreasing nickel futures prices will result in lower steel prices in the near future. Posco’s decision follows those of other Asian steelmakers cutting output including Nippon Steel, Hyundai and Sumikin Stainless Steel Corp., according to Bloomberg.

“Customers are hesitant to place buy orders on expectations that the falling price of nickel will pull down the price of stainless steel,'' Posco spokesman Ko Min Jin said.      

Long-term, steel demand looks so good that nearly all Asian steelmakers are increasing capacity both in Asia and abroad. Posco plans to spend $4.5 billion to build a new hot-rolled steel in Vietnam and has already started construction on a cold-rolled mill in Vietnam.

Nippon announced Aug. 9 it would spend $8.4 billion to expand its steelmaking capacity in Brazil. "That's a huge investment. That would make rivals like POSCO, Bao Steel and Arcelor Mittal who are considering a small mill in Brazil to have second thoughts about their plans," said Takashi Murata, analyst at Daiwa Institute of Research in a recent Reuters report. 

In India, JSW Steel’s managing director says the Indian steelmaker will increase its capacity tenfold in the next decade by building and acquiring facilities. JSW took a step in that direction last week when it bought 90% stakes in three U.S.-based firms from Jindal Saw: Jindal Enterprises, Jindal United Steel Corp. and Saw Pipes USA.