The world's top two steelmakers posted quarterly losses and warned the climb back to growth from the bottom of the economic slump would be gradual, with China setting the pace of recovery.
Global leader ArcelorMittal and second-ranked Nippon Steel Corp. said weak demand and inventory writedowns had depressed earnings, sending shares in both companies lower.
Japan's Nippon said on Wednesday its loss in the six months to September would be worse than expected while its bigger rival forecast only a slow pick-up over the rest of 2009.
The steel industry is seen as a broad gauge of an economy's strength, and demand for the metal has slumped as activity in the key automotive and construction sectors has tumbled. Cash-strapped customers have also tended to run down stocks rather than buy fresh steel, leaving many steel mills running at half capacity, though that process appears to be drawing to an end.
ArcelorMittal chief financial officer Aditya Mittal said he expected global demand for steel to fall 10 per cent this year, though the company had seen initial signs of recovery, with destocking drawing to a close and price rises in various markets.
"We are expecting the first half will be the bottom of the cycle. In the second half we should be see gradual demand growth and price increases - clearly from very low levels though," he told a conference call.
"A full recovery will be slow and progressive," he said.
Rabo Securities analyst Frank Claassen said: "It's a meagre outlook. There's recovery, but it's not as fast and as great as expected."
ArcelorMittal's much-watched core profit (earnings before interest, tax, depreciation and amortisation or EBITDA) slid 85 per cent in the second quarter to $1.22-billion (U.S.), beating analyst forecasts, as it made a worse-than-expected net loss of $792-million.
Nippon Steel said its recurring loss for April-June came to 56.7 billion yen ($600.7-million), widened its forecast for its April-September loss by 10 billion yen and warned uncertainties in the market placed its full-year forecast of break-even under threat.
"Our full-year forecast figures could prove temporary given the unclear environment in the second half," Shinichi Taniguchi, executive vice president of Nippon Steel, said at a news conference.
The results contrasted with Japanese peer JFE Holdings Inc., which forecast on Tuesday that it would post a profit this year as its core steel business recovers, triggering a sharp rally in its stock. JFE is expected to benefit most among Japanese steelmakers from recent spikes in export prices and the potential for stronger demand in China, industry watchers said, as exports account for about 40 per cent of its sales.
ArcelorMittal CFO Aditya Mittal said demand for steel in China - where the government has committed to spending around $585-billion on stimulus measures focused on building and infrastructure - was running 10 per cent higher than last year.
He also said the company is considering options for its operations in stainless steel - a sector dogged by overcapacity and viewed by analysts as ripe for consolidation.
Acquisitions or a joint venture were possible, though it would not consider selling the assets, he said.
Spain's Acerinox's, a leading stainless steel manufacturer, could be hit by fresh writedowns when it reports what is expected to be a first-quarter net loss later on Wednesday, analysts say.
The firm, which has cut output by 50 per cent, is also expected to see little improvement in its fortunes before the third quarter.
At 0934 GMT, ArcelorMittal shares were down 4.2 per cent at 24.25 euros and Acerinox up 0.7 per cent at 13.98, against a DJ Stoxx European basic resources index down 0.8 per cent.
Nippon Steel closed down 3.45 per cent at 364 yen.