Global steel demand will increase this year, but the steel industry still has a ways to go before getting back to pre-financial-crisis levels as global growth remains sluggish, the head of the world's largest steelmaker said Tuesday.

"We will see a 10% increase in global demand this year," said Lakshmi N. Mittal, chairman and chief executive officer of ArcelorMittal (MT).

After the collapse of steel demand last year amid the global economic crisis, consumers have begun demanding more product and steel companies have had to increase production, he said at the annual Steel Success Strategies conference in New York. A faster-than-expected recovery in China has helped boost steel demand.

But "there are still numerous challenges ahead of us," Mittal said. "Recovery will be slow."

In light of the European debt crisis, a double-dip recession that would again hit steel demand "is not an idle threat," he said.

Market participants have feared that debt loads in countries like Greece, Spain, Portugal and Hungary and austerity measures to deal with the problems may blunt the worldwide economic recovery.

In the United States, high unemployment despite massive government stimulus measures is "clearly a reminder that recovery will be slow," he said.

Mittal does not see recovery in developed world steel demand to pre-crisis levels until 2012.

While the situation in developing nations is more positive for steel consumption, the steel market must remain cautious given China's ongoing monetary tightening efforts, he said.

The nation has recently moved to limit investment in its property sector in efforts to cool growth.

China has also been adding to steel capacity and is on track to created 60 million tons of additional capacity this year and 40 million extra tons next year, Mittal said.

Another challenge for steelmakers is the advent of quarterly iron ore pricing, instead of the historic norm of yearly pricing, he said.

That has created more volatility, speculation and price increases and is making it harder for steelmakers to offer price contracts to long-term customers, he said.

-By Matt Whittaker, Dow Jones Newswires; 212-416-2139; matt.whittaker@dowjones.com
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