What ArcelorMittal, ThyssenKrupp Are Doing With Bearish Steel Price Forecast

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Continued from Part One.

As we reported recently, European steelmakers are hampered in responding to the situation by domestic politicians keen to maintain employment in difficult times.

Only Tata Steel has really bitten the bullet in Europe, with a recently announced plan to slash 900 jobs in the UK and close 12 sites. In the process, they have taken a £1 billion ($1.5 billion) impairment charge and plunged themselves into a first quarter loss, but at least the firm will be better positioned to weather the new normal in Europe.

Meanwhile, ThyssenKrupp and ArcelorMittal are posting first quarter losses and fighting local battles with politicians and unions hell-bent on preventing closures in their backyard.

Global overcapacity is estimated at some 334 million tons, according to Morgan Stanley, and over the major producing regions only North America, which has shown more resilient growth and is set to benefit from lower energy costs, appears best able to cope.

today's metal prices - MetalMiner IndXWith so much steel and so little demand, relatively speaking, prices are likely to remain subdued for some time. Iron ore and coking coal prices have fallen and there seems to be little prospect of a reverse in that trend unless Chinese mills look to restock at lower prices later in the year. Even so, a sharp turnaround in raw material prices seems unlikely.

The longer over-production continues in China and the issue of overcapacity in Europe is kicked down the road, the worse the problem will become.

The silver lining?

That steel consumers can look forward to lower input costs for the foreseeable future – a trend that will be welcome across the manufacturing and construction sectors.

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