Wednesday, September 17, 2008

JSW Steel Predicts Metal Prices, Demand Will Revive

By Paul Gordon and Debarati Roy

Sept. 17 (Bloomberg) -- JSW Steel Ltd., India's third-largest producer, predicted prices and demand for the metal will revive after next month as steelmakers lower production globally.

``Some European companies have already announced production cuts,'' Seshagiri Rao, finance director at the Mumbai-based company, said in an interview today. ``Also, the cost of production remains high as coal prices have not fallen.''

A global slowdown in economic growth has lowered steel demand from builders and makers of cars and appliances. JSW Steel cut prices by about 5 percent this month, joining ArcelorMittal, the world's largest mill, which said this month it will cut prices in South Africa by an average 5.6 percent.

``There's some balance now between demand and supply and countries including China have lowered production to remain profitable,'' Rakesh Arora, an analyst at Macquarie Group Ltd., said today. He has an ``outperform'' rating on the stock.

U.S. raw steel production fell 0.4 percent last week to 2.055 million tons from 2.062 million tons a week earlier, the American Iron and Steel Institute said on Sept. 15.

The pace of growth in China's crude steel output slowed as production from January through July reached 308 million tons, 9 percent higher than a year earlier, ``marking single-digit growth for the first time in many years,'' Macquarie Group Ltd. said last month. Steel prices in China, the largest producer of the metal, fell for a second straight month in August as demand slowed.

Coal, Ore

Coking coal prices have tripled, while iron-ore costs have almost doubled since April 1. Surging demand from China, the world's biggest consumer of the ore, has boosted prices this decade helping producers win a price increase of as much as 97 percent this year. Contract coking coal prices for the year that began April 1 have surged to as much as $308 a ton.

JSW Steel and other Indian steelmakers have been forced to hold prices since May to aid the government's efforts to cool inflation that rose to a 16-year high. JSW Steel said in July first-quarter profit slumped 52 percent because of the price cap and record raw-material costs.

JSW Steel shares today reversed a three-day decline, gaining as much as 3 percent. They traded at 654 rupees, up 1.2 percent, at 12:14 p.m. in Mumbai. The Bombay Stock Exchange's benchmark Sensitive Index fell 1.4 percent. India & Pakistan

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