The global market has become vulnerable today more than ever

World production will fall over the next 12 months due to an overabundance of capacities and reducing the growth rate of the Chinese economy, analysts of the COOFACE consulting company say.

Coface specialists have prepared and published an analytical report on risks for the modern steel industry.

In the annual perspective, experts believe, in the Chinese market there will be a reduction in the production of steel and metal rolling caused by a fall in domestic demand.

Especially difficult times will come for the eurozone metallurgists, where there is a tangible decline in the automotive and construction industries, and the metal products of local metallurgical plants are supplanted by Chinese metal production.

“These are difficult times for the steel markets in the world, when the world's largest manufacturer, Arcelormittal, announced to write off more than four billion dollars in the cost of its European assets, accusing this to weakening the demand for steel,” says Grant Williams, director of the COOFACE department in the UK.

Tata Steel recently announced the restriction of new investments and reduction of staff at the English factory in the port of Talbot.

"The metallurgical sector will be vulnerable to the debt crisis, growing with renewed vigor in Europe. Inevitable will be the failure and untimely in the calculations with suppliers, as well as additional requirements of credit institutions to ensure loans issued by metallurgical enterprises," emphasized Grant Williams.

Coface experts identified the following key points for the steel market and metal rolling next year:

1. With the total growth of production steel in 2012, production capacities in December were loaded only by 77%, against 82% in April. The excess supply of steel will put on the price and have a restraining effect on production in 2013;

2. China dominates the production of steel for less than 10 years. In 2001, the share of Chinese metallurgists in the world production of steel was less than 18%, but today more than 45% of the world's steel reserves are produced in China today. The European Union currently melts 11% steel, against 22% in 2001.

3. The production of steel in China today suffers from the global economic recession, which seriously patted exports. China’s domestic market is under pressure from high prices for iron ore and restrictive government measures aimed at preventing uncontrolled construction boat. China metallurgists announced about 96% of loss of profit in the first half of 2012 compared to 2011;

4. China’s steel market is very fragmented: only 18% of steel production accounts for five main companies, and the rest is produced by several thousand small and medium metallurgicals