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Mechel OAO Message Board

  • apostate_001 apostate_001 Dec 18, 2008 11:32 AM Flag

    Steel Production Cuts

    MTL's announcement that it is cutting its steel production by 20% is similar to other cuts announced by other steel producers worldwide. Meanwhile, most nation's forecast GDP growth, while reduced, is still positive or just slightly negative--but no where near -20%. Also, China and the USA have massive infrastructure build-outs upcoming for economic stimulus.

    Doesn't this suggest that supply--being radically reduced--is likely to fall short of demand in the coming year? Isn't the expected reduction in steel demand being overstated (i.e., excessively negative)?

    Other posters opinions on supply/demand are solicited.

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    • I believe it depends on sector you select as the example.
      China is moving ahead with infrastructure -- using its reserves ( of which it has plenty) but it is also the country most in need of infrastructure -- they must build water tx plants, roads, housing, and pretty much everything they've neglected over the past 50 years. They also may want to use those US treasury reserves before inflation runs amok.

      U.S. needs repairs on infrastructure and Pres. elect Obama is eager to stimulate the economy even if it means increasing already surging debt. Besides there is not much else he can do at this time.

      Russian govt. is in good shape economically but is reluctant to take on the massive debt necessary to stimulate its' economy and the markets to improve infrastructure. They will allow their currency to deflate and wait out the return of oil to a profitable trade.

      Therefore, China and US steel will accelerate their output as demand necessitates , but Russian steel is apparently on hold until oil returns > $60. /bbl and how long will that be?

      X is down almost 10% today, as it will be 2-3 mths, before this stimulation is utilized.

    • I agree that the panic toward doom seems overdone. Russia plans to spend large amounts on infrastructure and will need a lot of steel for railroads, pipelines, and construction.

      Keep in mind that the wits who are now predicting that everything is going into the sewer were earlier predicting that everything would go to the moon.

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