Steel's (CPSL) (GNI) (ZEUS) (WOR) (MT) and China Demand

For the most part, as goes China so goes the demand for steel, and in that regard it doesn't look good for steel companies like China Precision Steel, Inc. (Nasdaq:CPSL), Great Northern Iron Ore Proper (NYSE:GNI), Olympic Steel Inc. (Nasdaq:ZEUS), Worthington Industries, Inc. (NYSE:WOR) and ArcelorMittal (NYSE:MT), which are going to be pressured in the years ahead from declining demand from the Middle Kingdom.

According to the China Iron & Steel Association, the Chinese government is pushing to slow down economic growth, which will result in demand for steel in the country to slow down.

Estimates under the current scenario for the steel sector have steel consumption declining in China by a minimum of 2.6 percent to as high as 4.6 percent in 2011.

Globally it doesn't look good for the next five years or so either, as the top estimates are for steel demand to grow at a 5 percent rate annually, although many think it'll be less than that.

In the short term, the U.S. steel industry should ship product at 14 percent above 2010 levels, reaching about 95 million tons in 2011.

All the companies are being affected by soaring iron ore prices and other inputs, which are putting stress on margins and earnings because buyers are hesitating to acquire product at too high of prices; something that will continue for several years.

For the steel industry, there isn't much to be optimistic about, no matter how the situation is spun. It's going to remain tough for some time.