China and auto makers will support steel for the rest of 2011, ArcelorMittal and Nippon Steel said on Wednesday, allaying concerns that the third quarter will mark more than just a seasonal dip.
American producers US Steel and AK Steel sparked a sharp sell-off of steel stocks on Tuesday with warnings of reduced earnings in the July-Sept period, echoing comments last week from Korea's POSCO.
World No. 1 steelmaker ArcelorMittal, which makes 6 to 7 percent of the world supplies, said weakness in the third quarter was seasonal due to summer in the northern hemisphere.
It also raised its forecast for global apparent steel consumption this year, referring to deliveries to customers, due to stronger demand from China. Consumption in China, not a main market for ArcelorMittal but influential in driving prices and demand, should increase by more than 8.5 percent in 2011, meaning global sector expansion would be 7 to 7.5 percent.
Nippon Steel, the world No. 4, forecast higher profits this year than last yearafter the March 11 earthquake hit earnings in its April-June quarter. Automakers were ramping up output there, allowing Japanese steelmakers to hike prices more than other Asian peers could achieve in their domestic markets.
Nippon Steel said an improving economy was adding impetus to that rebound. Demand typically dips in the third quarter, but sector earnings also face pressure from record production in China and demand capped by tighter monetary policy there and debt problems in EU and the US.
ArcelorMittal Chief Financial Officer Aditya Mittal said his company expected a soft landing of the Chinese economy, with a slowdown of construction for the private sector offset by increased public sector spending on housing.