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SPOTLIGHT: Nippon Steel's six key steel market trends

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Japan's largest steel producer, Nippon Steel, told analysts at a meeting this week of six key trends it believes will define its business environment this year.

Global demand
Steel demand will grow, especially in emerging countries. The Japanese company expects global consumption in 2012 to reach 1.42 billion tonnes, an increase of 49.1 million tonnes – or 3.6% – over 2011.

At the high end
Demand for niche products will probably rise faster than , noting that new car sales in the USA are projected to rise by 1.5 million units to 14.3 million units, for example.

Poor growth at home
Demand in Japan will stay flat, with auto demand remaining healthy and some support from reconstruction in the north of the country. The Japan Iron & Steel Federation has pointed to shipbuilding as major source of weakness this year, with demand projected to drop 15-20% in the fiscal year to March 2013.

Inventory pressure
Nippon Steel warned that Japanese inventory levels would remain high. But it also pointed out that they have been on a gradual decline, with flat steel stockpile volumes falling from 4.32 million tonnes in December to 4.14 million tonnes by the end of February.

Asian oversupply...or not
Nippon Steel also believes that increasing steel supply in East Asia will have a gradually diminishing effect over the coming years as demand increases to soak up excess supply.

High costs
Finally, it said that raw material costs would remain “stratospheric”, with no signs of any downward trend.

Nippon Steel did not say how these trends would affect the company's earnings, noting that ongoing price negotiations with both customers and raw material suppliers have made it almost impossible to make an accurate forecast.

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