Reuters reported that the performance of European steel makers in 2011 will be shaped by their ability to pass on higher raw material costs and by contrasting growth in the industries they supply.
Mr Peter Archbold, European head of basic materials at Fitch Ratings, told reporters that "Possibly the biggest issue for steel producers this year is their ability to pass through costs."
He said that the price of most mining commodities was expected to be higher on average this year because of supply tensions, with coking coal expected to be the most bullish following floods in Queensland, Australia, that have cut output.
He added that "There is going to be some margin pressure for non integrated companies."
However, conditions for steel makers would also depend on demand from different industries, he said, noting that while ThyssenKrupp did not have integrated mining activities it was benefiting from brisk demand from the German car industry, one of ThyssenKrupp’s main outlets.
Fitch expected steel demand from the automotive sector in Europe to rise by 5% to 6% this year, in line with its outlook for overall growth in European steel demand. Demand growth would be faster in mechanical engineering, a key sector in Germany, at 7% to 8% but much weaker in construction at 1% to 2%.
Fitch sees 2011 global steel demand rising by 6% to 10%.
Mr Archbold said that the European steel sector as a whole was expected to continue this year its progressive recovery, which has seen output climb back up to 80 percent of 2007 levels, lagging the global market which has already reached pre-crisis levels, driven by Chinese production. He added that the pushing through of production costs should support steel prices in Europe.
( source: www.steelguru.com )