Although global steel production is expected to be up 3 to 4 percent this year, this growth has occurred in the first half of the year and steel production has leveled and is expected to remain flat in the second half. This will limit demand volumes for met coal and iron ore, favoring the lower cost producers for each commodity.China produces 42 percent of global iron ore supply, but ore grades at 20 percent keep costs high. As a result, China becomes a swing producer above its estimated profitability threshold of $120 per tonne. Despite the current dip in spot prices, the iron ore market should find support at the $120 per tonne level, and this will favor producers in Western Australia and South America. A high percentage of China’s met coal is mined from small mines in Shanxi province that have been the subject of safety campaigns, which has reduced supply of hard coking coal and increased costs by more than 40 percent. Additionally, increased use of large blast furnaces in China requires greater volumes of hard coking coal. The combination of these two factors will continue to increase met coal imports into China from the current level of 46 million tons annually. Recent information indicates that commodity markets are stabilizing at current levels. It is expected that demand will remain relatively flat until a broader recovery in the global economy provides a catalyst for increased commodity demand and capacity expansion. In the meantime, most commodities are oversupplied or near balance. As a result, customers are slowing their capacity expansion projects. Projects already underway remain in process, but they are being slowed by additional engineering review and updated project plans. The next round of projects has been reduced, and there is an increased focus on brown field projects that have shorter time to first production and less project risk. Many larger greenfield projects have been pushed out beyond 2013. As a result, it is expected that announced capital budgets will be underspent this year, and that under current market conditions, spending for next year will be flat.