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11 Jun 2010STEEL: Global Demand for Steel Bounces Back
Recent Gauteng Business News
Global demand for steel bounces back
• Industry preparing for strong growth in 2010 and beyond
• Absorbing increased input costs the biggest challenge
• Increased sector M and A activity a givenAs the global steel industry prepares for strong growth in 2010 and beyond, steel producers face the new challenge of meeting a sharp rise in demand for steel products while maintaining profit margins in the face of rising input costs, says a new report on the steel sector from KPMG International’s Global Metals Practice.
Companies that reduced capacity and lowered their inventory levels during the global recession are now struggling to fill customer orders.
At the same time the sharp increase in the prices of iron ore, coal and energy has not yet been matched by price increases for customers.
Steel prices have seen a gradual turnaround since the middle of 2009 and prices can be expected to continue to rise. But the spread in metals pricing due to higher input costs and the limitations to passing along finished product price increases to consumers in a still weak global economy is a critical issue for steelmakers, says KPMG.
In the context of a recovering global economy, increased demand and a more productive steel industry, increased sector M and A activity is a given, with Central Asia and the Asia/Pacific regions the main focus of deal activity and China the main acquirer.
In this new environment, new approaches and strategies are required.
Gavin Maile, KPMG Africa Head of Metals, said, “Companies can take greater advantage of today’s changing environment by finding leaner ways to operate, improving risk management in their supply chain and developing new strategies to forecast demand more precisely.”
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