Chinese slowdown could hurt global steel

Jun 21, 2012 | 04:07 PM | Michael Cowden

Tags  steel, real estate bubble, Nicholas Lardy, Peterson Institute for International Economics, Michael Cowden

NEW YORK — China’s economy is slowing due to a potential real estate bubble and a dip in export demand, and the resulting squeeze could hurt global steel markets as China scrambles to find a home for excess capacity, according to one analyst.

Perhaps the only way for China to resume its previous growth levels would be for it to reorient its economy away from exports and property development and toward domestic consumption, Nicholas Lardy, a senior fellow at the Washington-based Peterson Institute for International Economics, said during a luncheon presentation at the Steel Success Strategies XXVII conference in New York co-sponsored by AMM and World Steel Dynamics Inc.

"I think the old model where they relied a lot on exports and property development is not sustainable," he said. "They may have another year or two out of it, but if you want to look forward three or four years, they need a basic change."

The steel industry has an interest in seeing reforms boosting domestic consumption and growth in China succeed, Lardy said. "If growth slows down, China is going to have a huge amount of excess capacity in the steel industry. We’re seeing some of it already with an increase of exports throughout this year compared to 2011."....

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