Good times for German steel producers

Thanks to China steel is all the rage. The German steel industry fares as well as it has not for quite a long time. Last year crude steel production amounted to 47.2 million tons in Germany which is the highest figure since re-unification. The Essen based Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI) estimates that 2007 and 2008 will also be good years for the German steel industry. In both years production ought to be slightly above that of 2006, but not grow very much any more given that capacity limits will soon be reached.

However, the number of employees in this field is set to decrease further but at a moderate pace. With regard to global production of steel the RWI forecasts increases of 6.0% and 4.6% in 2007 and 2008 respectively.

World steel production rose by 8.8% to 1.24 billion tons last year. As in previous years the driving force behind this development was China (which in the meantime has come to account for almost one third of global steel production) where steel output increased by 17,7%. The 2006 increase in the crude steel production of the EU-25 and the CIS regions was 6.0% in each case as compared to 2005 and 3.8% and 3.3% in the USA and Japan respectively.

The RWI in Essen expects that in 2007 global crude steel output will increase by 6.0% to reach 1.31 billion tons and by another 4.6% to 1.37 billion tons in 2008. Presumably this growth cannot be attributed to China alone any more, but also increasingly to Russia, India and Brazil which in the list of leading countries regarding steel output are currently in fourth, seventh and tenth position respectively. In the meantime prices on commodity markets are likely to fall. In recent contracts the prices agreed upon are below those of the year 2006. However, in the long run the steel price is set to remain at a relative high level given that a considerable decrease in prices is unlikely due to the fact that China will be increasingly dependent on the import of raw materials in the future. Problems to the EU´s steel market could arise, if excess capacities were built up.

Above facts are based on the »RWI : Stahlbericht« which is part of the current economic report filed by the RWI in Essen. It is available for free-of-charge download in PDF format. GERMAN