Chinese Steel Output Growth Stalls
Official December crude steel production released by the National Bureau of Statistics today came in at 1.54 million tonnes per day (mtpd), a 2.4% decline compared to November’s 1.58 mtpd. Total December crude steel production came in at 47.7 mt, a 0.8% increase from November’s 47.3 mt, due to one extra day in the month.
Decline Bucks Seasonal Trend
While steel demand often slows in December, Chinese production usually has a slight uptick as producers and traders build stockpiles in anticipation of better prices or greater demand the following year. Compared to the 10-year average increase of 1.1%, December’s drop seemingly indicates some hesitation by the mills as inventory levels are quite high through the supply chain. We believe the small decline is less significant as production still remains high – December output was up 26% year-over-year bringing 2009 production to a record 567.8 mt.
While two consecutive months of falling production (November average daily production was down 5.4% from October) is a step in the right direction, rising steel prices dampen any hope that this will become a trend; the 15-month record exports in the month also is a bit disconcerting. We remain concerned about the acute disparity in operating rates in China and outside the region – coupled with China’s high-cost position, government subsidies and dumping behavior