If you think the world’s banks are badly off, what with shares often trading at barely half of book value amid a blizzard of regulatory, capital and structural shifts, spare a thought for those who own steelmakers. The share price of ArcelorMittal, the world’s biggest steel group by production, has fallen 80 per cent since its peak in 2008. Nippon Steel, the world’s number six, trades at 0.6 times book value. With demand for steel slowing, could there be worse to come?
According to the World Steel Association, consumption of the metal will grow just 2-3 per cent this year and next. That is down from an average 10 per cent growth each year over the past two years. China is supposed to be responsible for half of the world’s steel demand. Yet its economic growth may have peaked; the authorities are trying to shift the economy away from infrastructure investment-led growth. But there is also a glut of steel on the supply side. There is an estimated 250m tonnes excess in the global supply chain, which is equivalent to almost one-fifth of annual consumption. Over half of that glut is in China.
Other Asian economies are not picking up the slack. Indian steel consumption is growing about 5 per cent each year, but demand there accounts for just 5 per cent of the global total. Demand in Indonesia is just one-sixth of India’s.
