Steel industry braced for a new normal The steel sector is expected to make a moderate recovery next year with subdued demand and weak price rises putting company earnings under severe pressure. World production of steel will rise by a muted 2.9 per cent during 2013, helped by a 3.5 per cent year-on-year increase in output in China, according to a survey of 20 steel executives and analysts. Average prices are expected to climb by just 2.3 per cent. The Financial Times poll suggests the sector is moving into a period when low rates of increase in production and consumption become the new norm, with inflationary trends less pronounced than earlier in the decade when prices rose rapidly on the back of rapacious increases in demand, especially in China. Next year would be a "survival" year for many producers of the metal, said Bruno Bolfo, chairman of Duferco, the world's biggest steel trader. "The overall industry will remain [with a large amount of ] over-capacity [leading to] low [profit] margins, with consequent unsatisfactory results for the steel mills," he said. The pressures are especially fierce at many Europe-based steel makers including ArcelorMittal and ThyssenKrupp, which have been hit by weak demand on the continent in construction and car manufacturing. For big steel producing and consuming countries outside China "it is hard to find cause for optimism" about the outlook for the industry, said John Lichtenstein, head of global metals research at Accenture, the consultancy. However, Alexei Mordashov, chief executive of Severstal, Russia's biggest steel producer, was more positive citing accelerating growth in China and the restocking of inventories that in some cases had fallen to extremely low levels as a result of widespread economic uncertainty. Sajjan Jindal, chief executive of JSW, a big Indian steel producer, was also upbeat, saying the coming year was likely to be more "certain and stable" than 2012. Weak conditions in the steel industry have been matched by poor investor enthusiasm for the shares of leading producers. The composite price index of all the world's publicly quoted steel companies, relative to world stock markets overall, has fallen by nearly 20 per cent since February 2012, according to Datastream. World steel output between 2003 and 2007 rose more than 6 per cent a year for six years in a row, a trend never previously seen since reliable data for the sector became available at the start of the 20th century. The high period of demand was triggered mainly by a surge in production and consumption in China, which between 2000 and 2012 tripled its share of world steel output from 15 per cent to 46 per cent. World steel output in 2012 rose just 1.3 per cent compared to 2011, helped by an increase in Chinese production of 3.3 per cent, according to industry estimates. The steel industry was one of the hardest hit by the 2008/09 financial crisis with global output falling 8 per cent in 2009.