Mittal Steel, the world’s top steel maker, said on Wednesday that it plans to reduce its global steel production by one million tons in the third quarter of 2005, following similar cuts in the second quarter.
The Netherlands-based Mittal said the production cuts will be equally split between the company’s North American operations and those in Europe and the rest of the world.
”It is essential that we act in a responsible and mature manner, and respond accordingly to current market dynamics,” said Lakshmi Mittal, Mittal’s chairperson and chief executive. ”The production cutbacks that we have announced today will help to reduce the inventory build-up that we currently have and help to restore equilibrium to the global supply and demand equation.” Analysts say that ongoing global consolidation has given the industry the ability to try to stabilise falling prices by adjusting production more swiftly to meet demand.
”Steel companies today are more inclined and more able to cut production than they have in the past because they’re more consolidated and their cost structures are more rational,” said Peter Morici, a steel consultant and business professor at the University of Maryland.
Morici said steel companies would like to have more control over prices so they’re not merely reacting to market conditions.
Analysts say it’s also perhaps the first sign that the global market is beginning to take more shape as demand returns to more realistic levels and China begins selling more steel than it buys.
”Last year, in my opinion, steel demand wasn’t nearly as strong as the American Iron and Steel Institute and the steelmakers claimed,” said Charles Bradford, an analyst with Bradford Research-Soleil Securities Corporation in New York. ”The economy just wasn’t that good and one-half of the steel market [autos and nonresidential] was soft.”
Bradford believes inventory that built up last year must be worked off this year.
For 2004, Mittal Steel had revenue of $22,2-billion and steel shipments of 42,1-million tons. Earlier this week, the company officially launched a bid for Turkey’s state-owned flat steel producer Eregli Demir Celik, or Erdemir.-Sapa-AP