The best ways to play the Olympics steel boom

Global steel demand has risen by 6% a year since 2000, largely thanks to China. We look at two of the best stocks in the sector, and ask: will demand outlive the Beijing Olympics construction boom?

Tokyo is seeing something of a crime wave. These days, you never know what's going to disappear overnight: the list of things nicked from the city's streets has recently included pavement gratings, electrical cables and even the occasional playground slide. So what's going on? Police say thieves are spiriting all the scrap steel they can find away to Yokohama, where it is loaded on to ships and taken to Beijing. Here, this highly sought-after (and handsomely paid for) commodity is used to feed the Olympic construction boom.

Global steel demand has risen 6% a year since 2000, thanks in large part to the huge boom in demand from China (where, to give just one example of where the steel goes, 108 new airports are to be completed by 2010). But while China has accounted for well over half the rise and now uses 30% of the world's steel production every year, steel demand isn't just about China. Construction-driven demand has been rising at well above 10% a year in emerging markets such as Brazil, Russia, India (where spending on infrastructure is set to rise 40% this year) and the Middle East too, and that demand doesn't look like it is going to fall off any time soon. The International Iron and Steel Institute has forecast a rise in demand of 5.9% as their base case for 2007, but this is predicated on sharp mid-year slowdowns in the US, Europe and Japan, which, of course, may not happen. Even if it does, this may have little effect on demand levels in Asia.

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Eoin came to MoneyWeek in 2006 having graduated with a MLitt in economics from Trinity College, Dublin. He taught economic history for two years at Trinity, while researching a thesis on how herd behaviour destroys financial markets.