As we are finding out with the Rio Tinto case in China, steel is now a very important and very political international business and not just some sideline as many business people once thought as they headed off to the tech and net sectors.
With the rapidly emerging countries of China, India and Brazil, and to a lesser extent Russia, now more dominant in the international market place, steel demand has returned to centre stage as a source of national well being (as it used to be in the UK and Germany in the 19th Century).
The concentration on the iron ore businesses of Rio and BHP Billiton underline the new importance of steel: the coal businesses of both companies do not rate the same attention because China and Russia have significant coal reserves of their own. In fact China is a (declining) coal exporter.
But as more and more vessels leave Queensland and NSW ports carrying coking and thermal coal that should change. In fact it has with China importing more coal than it exported in the June half.
China’s coal imports surged by 126% year-on-year in the first half of 2009, reaching 48.3 million tonnes, according to China Customs. Coal exports, at 11.7 million tonnes during the same period, fell 54.2%.
Net coal imports reached 36.6 million tonnes, compared to 3.9 million tonnes in the same period last year. Overall, China produced around 1.4 billion tonnes of coal in the first half of the year.
Spot iron ore prices continue to rise, hitting $US93 a tonne (including freight and insurance). That’s around $US80 a tonne ex Western Australia, against a 2010 contract price in Asia of around $US64 a tonne.
Demand is rising and the Chinese mills resisting BHP and Rio’s offers are being left behind.
That’s good news for the two big companies and some analysts now wonder if iron ore prices will actually rise in the 2011 contract year instead of falling.
Certainly the way the global spot price is coming to the fore as a pricing indicator, and the way demand seems to be recovering, that looks more of a possibility than it did six weeks ago.
And that will help drive the share price for the big two, plus hopefuls like Fortescue higher and take us back to the market volatility of 2007-08.
Because of this new attention to steel, it has become an important indicator for the health of some economies, such as China, and the health of the world economy.
The credit crunch and plunge into recession late last year took demand for steel and production with it.
Six months on since the end of 2008, when steel output was approaching its lows and major producers like ArcelorMittal, Baosteel, Nippon Steel and Posco were cutting output and jobs almost daily, steel demand is on the improve, driven, it must be said by the recovery in China.
BHP hinted this week that it could see a recovery in steel demand for iron ore in North America on the horizon and other industry players say the Japanese and South Korean industries are turning up, ordering more iron ore and coking coal from Australia in the process.
And figures out this week showed that global crude steel production fell at a slower pace in June, although analysts said most of the new production was in China for re-stocking efforts.
Crude steel output fell by an annual 16% year-on-year to 99.8 million tonnes in June.
The World Steel Association said that was also up from the 95.6 million tonnes produced in May. That was down more than 21% from May 2008.
(The association accounts for around 85% of all global steel production.)
China’s crude steel production for June 2009 of 45.39 million tonnes was 6% higher than in June 2008, although elsewhere, output was weaker.
Over the first half of 2009, crude steel output fell 21.3% to 549 million tonnes, with China’s output heading for an annual rise of around 10%, which would take output to around 550 million tonnes.
China’s crude steel production rose 1.2% to 266.6 million tonnes in the first half of this year.
China’s huge spending program is driving investment and demand for steel.
Car sales are up nearly 50% in June and May, with locally made car production rising 38% in June from a year ago.
That in turn is leading to higher output for Chinese iron ore and higher demand for imports, which are running at 57 million tonnes a month.
China’s monthly iron ore output jumped nearly 27% in June to 83.3 million tonnes.
The World Steel Association produced these figures for June production of crude steel:
China’s crude steel production for June 2009 was 49.4 mt (million tonnes), 6% higher than June 2008 and up from 46.5 mt produced in May.
Japan produced 6.9 mt of crude steel in June 2009, down 33.6% compared to the same month last year. That was up from the 6.5 mt in May.
South Korea recorded a decline of 14.4% from June 2008, producing 4.0 mt of crude steel in June 2009. That was down slightly from May’s 4.2 mt.
In the EU, Germany’s crude steel production was 2.5 mt in June, down 41.1% from June 2008.
Italy produced 1.6 mt in June 2009, down 43.1% from 2008; Spain produced 1.2 mt of crude steel in June 2009, off 31.4% from the same month last year. France’s output fell 37.9% from June 2008, producing 1.1 mt in June of this year.
The US produced 4.4 mt of crude steel in June 2009, down 46.9% compared to the same month last year. Brazil produced 1.9 mt of crude ste
