Chinese Cuts Take a Bite Out of World Steel Production

Includes: MT, NUE, X
by: Michelle Galanter Applebaum
Chinese Output Cuts Ease World Steel Production
Global steel output fell 2.1% to 3.58 million tonnes per day (mtpd) in November from 3.66 mtpd in October. The decline came entirely from a drop in Chinese production, which fell 5.6% to 1.58 mtpd in November. While Chinese mills had repeatedly ignored attempts by the Chinese government to rein in production, we believe higher raw material costs and rising inventories finally forced steelmakers to cut output. Chinese production is still high – only 7% below September’s record – and we hope to see further production cuts moving forward to bring the production/consumption ratio more in balance.
Production Steady Outside China
November production outside China remained relatively flat, with the Middle East down 5.2%, Asia (excluding China) down 1.2%, Europe outside the EU-27 down 3.9%, and South America down 0.7%. Production rose by 2.5% in the EU-27, 2.4% in North America, and 0.9% in Africa. Total steel production for the month fell 5.2% sequentially to 107.5 million tonnes due to one fewer day in November.
First Significant Rise Year-Over-Year
Global production increased 24% from November 2008, the first meaningful year-0ver-year rise of 2009. Production cuts due to the economic slowdown did not fully take affect until the fall of 2008 so the year-over-year comparison has been meaningless until recently.
We expect to see further reduction in December as worries about government action as well as too-high inventories power down many Chinese mills at a time when they normally perform routine maintenance. However, we remain concerned that Chinese mills will continue to favor increasing exports over cutting production; November steel exports rose 6% to 2.87 mt and are a whopping 115% higher than the lows in May; we’re increasingly hopeful that perhaps we’re past the worst.
Disclosure: NA