Chinas demand for scrap metal to feed its growing steel industry was a primary cause of last years spike in steel prices. However, a study by the London office of Switzerlands UBS AG concludes that a slowdown in the Chinese economy could reverse steel prices in the coming year. Beijing is already working to cool an overheated economy, resulting in only a 5% monthly increase in imports by the end of 2004. This was down sharply from the 26% average monthly increases between 2002 and early 2004, says UBS. Chinas steel production climbed 22%, to 268 million tons in 2004, resulting in a global squeeze on steel supplies. Chinese steel capacity is expected to grow another 14% in 2005. The North American Steel Trade Committee is predicting that some 250 million tonnes of new global steel capacity will come on to the market during the next five years. Steel prices could fall nearly $200 a tonne by the end of this year as a result, says Peter W. Hickson, a steel analyst at UBS. Currently, the global steel market produces about 1 billion tonnes annually.
