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Thursday, June 25, 2009

Steel producers confirm output beginning to rise

Wednesday, 24 June 2009

Global steel producers are cautiously increasing production -- albeit from extremely low levels -- as signs emerge of modestly improving demand and recovering investor confidence, industry leaders said Tuesday. Speaking to participants at American Metal Market's Steel Survival Strategies conference in New York City, ArcelorMittal SA CEO Lakshmi N. Mittal said he has been seeing "green shoots" of stronger demand.
"Chinese steel demand is now forecast to show growth this year compared with a previously expected decline," he said. "The de-stocking period has led to historically low levels of inventory, for example here in the United States, where inventories are at their lowest since 1983."
After Mittal's remarks, John P. Surma, head of Pittsburgh-based United States Steel Corp., indicated the likelihood that at least one blast furnace will be restarted at the company's mill in Granite City, Ill.
"Market conditions have improved a bit lately," he told conference participants, but like Mittal he was not sure if the improvements will last.
Part of the current upturn stems from U.S. carmakers, Surma said. He cited General Motors Corp.'s move to discontinue several unprofitable brands, Chrysler LLC reportedly being near an end of its bankruptcy process, labor concessions for both companies and an expected uptick in sales from the recently passed cash-for-clunkers bill.
"We're encouraged that there is some stability is returning to the domestic auto industry. We're very excited about what's happening with GM," he said.
Both ArcelorMittal and U.S. Steel derive about 15 percent of their revenue from carmakers.
The strengthening demand is returning some pricing power to steel companies. For example, ArcelorMittal has announced August sheet price increases of about $50 per short ton, which follows a smaller price hike for July.
Both Mittal and Surma also noted their companies' recent success in raising funds. Surma said U.S. Steel 's public offering of common stock and senior convertible notes raised nearly $1.5 billion.
"Maybe the capital markets are sensing that the worst is behind us," Surma said.
Mittal said his company has raised several billions of dollars in the last few months.
In afternoon trading, shares of ArcelorMittal rose $1.38, or 4.5 percent, to $31.95. Shares of U.S. Steel gained 44 cents to $34.56.
Source: Associated Press