Tuesday, June 03, 2008

Lack of funds, high steel prices delay Asian projects

Rising raw material costs for steel have pushed prices higher and with a lack of liquidity in the financial system projects in Asia are being put on hold, industry leaders told a conference.

Infrastructure projects, in which steel is one of the main items, are being delayed. Steel expansion or new steel schemes are expected to be cut back in other parts of the world.

"Vietnam has been affected, but also India, there are projects that are being put on hold now," said M. Shaad, commercial manager at metals trading firm Global Allianz UK Ltd.

Speaking on the sidelines of this week's Bureau of International Recycling Conference (BIR), Shaad said that trading partners in his main market India suffered from a tightening of credit for purchases of metals and scrap metals.

"In Vietnam it is purely because of the credit crunch," Shaad said, referring to bankers being reluctant to lend money due to a lack of liquidity in the global economic system.

Difficulty in financing steelmaking and scrap processing operations was seen in the United States with lenders reluctant to increase credit lines, Jeremy Sutcliffe, Chief Executive of metals recycler Sims Group, told the conference.

This is going to be an increasing problem, as steel buyers find that existing credit facilities are insufficient to finance their  ongoing requirements. With steel costs doubling and banks reluctant to extend further credit facilities, companies are going to find it increasingly difficult to fund the stock they need to keep manufacturing running at optimum levels. This will not only affect Eastern economies, but those of the West too.

Full article at Reuters.

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