ANALYSIS-Steel demand recovery favours BRIC, shuns U.S.,EU

* EU, U.S. steel mkts not seen fully recovering until 2012

* China's production set to rise to new peaks

* Robust outlook for demand from Brazil, Russia, India

By Humeyra Pamuk

LONDON, Nov 19 (Reuters) - The global steel industry's much-awaited demand recovery next year will differ widely across regions, with mature economies facing a slow and painful improvement and emerging markets enjoying a robust comeback.

Capacity restarts have dominated headlines over the past couple of months, as steelmakers across the globe ramp up production citing an improvement in their order books, while prices around the world have bounced from record lows.

The initial improvement was mainly technical, analysts say, due to a restocking of depleted trader and middlemen inventories.

On Thursday, Austrian steelmaker Voestalpine (VOES.VI: Quote, Profile, Research) reported it had swung back to an operating profit in the three months to September, while a strong performance at Russian steel mills helped push the country's biggest steelmaker Severstal (CHMF.MM: Quote, Profile, Research) to a surprise third-quarter net profit. [ID:nLJ298392]

But that could be it for the good news for now in Europe and the United States, where recovery is seen tentative and fragile.

"There is a fundamental difference now in recovery between different parts of the world," said Ian Christmas, secretary-general of World Steel Association, whose members represent 85 percent of the world's total output.

"In industrialised countries it is a technical one (recovery), a major stock cycle and there's a lot of caution about the underlying demand next year," Christmas said.

"There's a great confidence in India, Brazil and China seems to be growing very strongly, but there's not that level of confidence about a real recovery in the maturer countries."

While the rest of the world faced severe production cuts this year, output in China, the world's top producer of the metal, has totalled 472.5 million tonnes in the first ten months and is heading for a record high. [ID:nSHA259420]

CAR SALES LIFT

Despite concerns that China's mills are producing too much steel, analysts said demand has held out so far, boosted by record automobile sales and stimulus-driven investment in infrastructure.

"We thought we would see another dip in demand (in China) but it's looking pretty good," said Geoff Boyd, head of automotive and steel research at CLSA Asia Pacific, based in Singapore.

Boyd said recent feedback from 18 steel consumers across the country showed that their inventories were either low or at normal levels with nobody suffering from high inventories.

Of the 18, a majority of them said they were planning on increasing their steel purchases next year, with none of them saying they wanted to reduce purchases.

"This is quite bullish and positive in terms of demand outlook," Boyd said.

Producers sound particularly upbeat about the prospects in the rest of the BRIC countries; Brazil, India and Russia, where a robust comeback is already emerging.

"We're particularly excited about BRIC countries," said Michel Wurth, a member of the executive board at the world's largest steelmaker ArcelorMittal (ISPA.AS: Quote, Profile, Research). The company said it had planned a $5.5 billion investment programme in Brazil.

"But real demand in the U.S. and Europe is expected to improve in 2010 albeit at a slow pace. Overall the demand from the developed world in 2010 will be 25 percent lower versus 2008."

Capacity utilisation rates in Europe have recently neared 70 percent and a similar level in the United States. However, some traders and producers are wary of this ramp up, citing the demand to meet the supply is not there.

"In the developed area, the strong view is capacity is coming back too quick and yes I'd agree with that," said Jack Maclachlan, head of steel division and a member of the executive board at Metinvest, Ukraine's largest steelmaker. [ID:nLH621183]

John Lichtenstein, global leader of steel at consultancy firm Accenture's output forecasts highlight the slow recovery the developed economies are set to face.

He does not forecast a solid recovery for Japan, European Union and NAFTA countries before 2012, while South American and CIS countries are looking at a recovery next year.

For a graphic tracking the trend in crude steel output, click:r.reuters.com/zyc52g (Editing by Sue Thomas)