Steel glut seems imminent

Sam Eaton Oct 4, 2006
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Steel glut seems imminent

Sam Eaton Oct 4, 2006
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BRIAN WATT: Meanwhile, in the steel industry many are worried about a global steel glut. They’re urging mills to scale back production. But in this boom-bust commodity market, that’s easier said than done. Sam Eaton reports.


SAM EATON: It’s a toxic brew of circumstances for an industry well acquainted with the peaks and valleys of the global commodities market.

As steel inventories pile up, automakers and appliance companies are scaling back production.

Add into the mix China’s double-digit growth in steel production and UBS analyst Timna Tanners says a steel glut is imminent.

TIMNA TANNERS: The big question of course is how much will prices fall, how bad is it? And that’s kind of hard to say. Once steel prices start to fall, it’s hard to tell how much they will fall. Ultimately it comes down to how bad is the demand slowdown?

Tanners says despite the troubled auto industry, there’s still a strong demand for steel, to build things like skyscrapers, pipelines and railroads.

And after the last downturn in 2001, which sent more than forty US steel companies into bankruptcy, she says the industry is much better prepared to ride out the bumps.

Which is a good thing Tanners says, because this one could last well into next year.

In Los Angeles, I’m Sam Eaton for Marketplace.

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