Editor's Letter

In Recovery

As we prepare to usher in 2010, it’s only natural to take a look at the year that was and attempt to put it in perspective.

For many, 2009, though volatile, could be described best as a time of recovery, as commodity markets sought to regain some of the strength they lost to the economic collapse of the fourth quarter of 2008 by bringing supply and demand into balance.

In the case of steel, the efforts appear to be working. Steel manufacturing registered positive growth for the first time since September 2008 this past September, according to the World Steel Association, Brussels. Figures for October 2009 also showed an increase, this time of 13.1 percent compared with October 2008, according to Worldsteel, with China’s crude steel production gaining 42.4 percent for the month compared with October 2008.

However, the same could not be said of other Asian steel-producing countries, with Japan and South Korea showing declines of 12.9 percent and 0.7 percent, respectively, for October 2009 compared with one year earlier.

EU countries also posted declines, as did the United States. However, Russia and the Ukraine posted increases of 24.2 percent and 42.9 percent, respectively, while Turkey’s production increased 25.5 percent. Overall, crude steel production in the 66 countries reporting to World Steel increased 13.5 percent for the first 10 months of 2009 compared with the same period in 2008.

Worldsteel also reports that crude steel capacity utilization has increased gradually since bottoming out in December 2008. The October 2009 ratio was 76 percent, 17.8 percentage points higher than the December 2008 ratio.

Despite the improvements illustrated by this figure, steel prices remain depressed at levels similar to those seen in 2005, according to industry analysts.

Paper producers also have been working to bring supply and demand into balance by shuttering a number of mills—in some cases temporarily and in others permanently. However, containerboard companies in Europe and North America remain in overcapacity, while China has resumed some stalled projects to add capacity.

While North American producers of steel and containerboard aren’t enjoying the same growth as their counterparts in other parts of the world, the global trade of secondary commodities gives some hope to North American processors and dealers. And hope is a critical component of any recovery.