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The take-away from Tokyo ... mostly turbulence free

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It takes 14 hours to fly non-stop from New York's JFK International Airport to Japan's Narita Airport outside Tokyo—time enough to knock off two movies, a crime novel and three in-flight meals served complete with hot towels and green tea.

The flight was virtually turbulence free, and for all practical purposes so was WorldSteel 44, which drew some 300 participants from 134 companies and organizations in 34 countries.

Over the course of two days in October, some 25 presenters moved seamlessly through a program structured around the theme "Building a Sustainable Recovery." Topics explored on stage at the Hotel Okura and in two early morning press briefings ranged from a much-anticipated short-range outlook for steel demand delivered by Daniel Novegil, the World Steel Association's economics committee chairman and Ternium SA chief executive officer, to other, more-prosaic subjects such as seismic design in the steel industry, automotive and new-generation vehicles and energy efficiency and new technology trends.

Hastily revised at a meeting held a month earlier in Rio de Janeiro, WorldSteel's short-range outlook counted as what might be described as a rising sun against an otherwise lunar-like landscape marked by gray uncertainty and a nagging concern over the potential of a double dip in the global economy. More dawn than dusk, the forecast emerged as the most upbeat among a number of assessments delivered during the Tokyo conference by various executives and officials from the host country and a panel of steel industry chief executives drawn from around the world.

Big picture, the short-range outlook is for a stronger-than-expected recovery in 2010, led by China and developing economies. "Steel demand in 2011 is expected to grow at healthy rates, with a slowdown in China and continuous growth in developing countries," the concluding slide stated. "Steel demand in developed countries to remain below pre-crisis levels in the short term."

Novegil and his colleagues on the economics committee hedged their forecast both upside and downside by identifying various risks/factors that could influence the course that world and regional economies take in 2011. "Ifs" that would move the 2011 economic outlook for steel deeper into positive territory include a higher steel intensity in China, investment coming from excess corporate cash and stronger recovery in developed economies. Potential counterweights in the form of downside risks range from the early withdrawal of stimulus packages and excessive budget tightening to conflict over exchange rates and excessive household, government and company financial leverage.

For all their gravity and implied consequences on the global economic stage, those three factors and four risks fall far beyond the purview and abilities of the world steel industry to control. On a less-cosmic scale, the industry faces collective challenges in arenas where it does have the wherewithal to make a difference.

Perhaps no one is in a more strategic position to assess those challenges than Ian Christmas, director-general of WorldSteel, who intends to leave that post next August after spending a dozen years with the organization.

In the closing minutes of what amounted to a farewell address, Christmas confronted the powers-that-be in the global steel industry with a list of five key challenges, the first of which is safety. "There is nothing inherent in the production of steel which requires anyone to be injured or killed in the workplace," he said.

"The second challenge is business profitability, which requires moving away from a tonnage mentality to an even sharper focus on value," Christmas said. "There is also a great risk of steel companies being caught between strong customers."

The third challenge increase R&D expenditures. "This should include research within the industry, but also a greater spend and collaboration with universities worldwide," Christmas said.

Challenge number four create a level playing field for competition around the world. "There are still too many subsidies and state aid used in the industry, which distort competition, and there are too many artificial barriers to competition internationally," he said.

"Lastly, there is climate change, which requires all steel users to step up to the challenge and ensure that we are seen as part of the solution and not the problem in moving man towards a greener future."

WorldSteel 45 is scheduled to take place in Paris next October. If all goes according to plan, the association will have a new director-general. If history holds true, the challenges will remain.


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