Changing the paradigm

6 October 2004 By Edward Hadas

Soaring prices seen in recent months won’t last as new supply comes on stream. But the bad old days of permanent malaise are finished. Demand growth in Asia means steel is better thought of as a growth cyclical, a bit like semiconductors.

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Arcelor, the world's largest steel producer, expects to increase steel prices by 7% in the first quarter of 2005. This increase is part of a trend. The average price of hot rolled steel is expected to be $410 a tonne in 2004, up from $213 in 2002, according to James F. King, an industry analyst.

The rising prices reflect buoyant demand. Global steel production will be increase 8% to 950m tonnes, according to the Iron and Steel Institute. The trade body expects a 4%6% increase in 2005.

In another sign of industry enthusiasm, Baosteel, the largest steel producer in China, intends to list its shares on the New York Stock Exchange.

Most analysts expect the boom to end fairly soon. For example, Mr, King predicts an average 2005 price for hot rolled coil of $354.

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