Workshop on Steel and Related Raw Materials
Kuala Lumpur 15/16th December 2008
Rapid economic development, especially in emerging economies, has fostered unprecedented growth in steel demand and production over the last six years until mid-2008. This, in turn, raised the steel industry’s demand for related raw materials, such as iron ore, coking coal, coke, scrap and ferroalloys. Raw material producers responded with significant increases in production, but short-term supply did not keep up with demand. At the same time, policy factors ranging from trade and investment restrictions to increasing regulatory burden occasionally placed additional strain on the markets. Partly reflecting the short supply and high price of key steelmaking inputs, steel prices rose significantly during this period.However, since mid-2008 markets have gone from one extreme to another. Steel demand and production are now weakening significantly, and prices of steel, steel related raw materials as well as key bulk shipping rates have fallen from historical peaks to very low levels.
Governments and industry reviewed and discussed current steel and steel-related raw material market developments, taking into account the consequences of the financial crisis presently hitting the world economy. The workshop discussed the raw material markets and explored ways and means to improve the functioning of these markets to ensure a secure, predictable and accessible supply of steel raw materials while highlighting win-win opportunities for all.
The workshop was organised in three sessions:
Session 1 “Main tendencies and issues of the day” provided an opportunity to review information and discuss developments in world steel demand on a global and regional basis, and what this means for raw material demand. Particular emphasis was paid to the sudden mid-2008 reversal of a six year-long trend, characterised by strong demand growth and rising prices. Despite production cuts by some steelmakers, supply now exceeds demand and prices have fallen sharply. Furthermore, participants discussed developments in each of the three main raw material markets, the reasons behind these developments, and how the industry has reacted to the recent and sudden downturn in demand.
Session 2 “Raw material supply - managing the unmanageable” individual mining, recycling, and steel companies informed the workshop of the rationale for, and effectiveness of, their policies and strategies responding to demand variations. Furthermore, participants were informed about policy factors ranging from trade and investment restrictions to increasing regulatory burden which are placing strain on the markets.
Session 3 “Policy dimensions in steel raw material markets - policies pursued by governments” examined the various government policy stances taken towards steel-related raw material markets. Following presentations on government policies, delegates considered ways and means of improving the functioning of these markets. Although such a discussion only cover a very limited number of problems, it was possible to achieve, inter alia, a better understanding of the different approaches and open the door to ensure security of raw materials supply for all players.
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