World steel output is expected to rise 10% this year, or just over 120 million tonnes, a bull point for BHP and Rio (and Fortescue Metals).
Analysts say that as well as the higher output, steel prices will rise while iron ore prices will also go up-by 30% to 40% (and perhaps more), meaning the companies will have the best of both worlds with rising demand for iron ore being met by the companies at significantly higher prices.
According to analysts at Macquarie Bank, 2010 crude steel production will rise to around 1.36 billion tonnes this year as consumers rebuild stocks of metal after they ran down inventories in 2009 to cut costs to cope with the slump in demand.
But this rebound will vary from region to region: in Asia and other emerging economies, such as Brazil and India, demand will be robust, so production will rise sharply.
The developed world, especially the US and Europe, saw falls of 30%-40% or more last year and demand this year will be slow to grow.
In fact analysts say that demand in mature economies is not likely to return to 2007 levels until 2012 or later.
But Japanese steel groups report accelerating demand from China for steel and are ramping up production, which in turn is good news for Australia and the likes of BHP Billiton and Rio Tinto.
Global crude steel output recovered strongly in the second half of last year to finish 2009 down just 8%.
That was one of the worst falls in its history, but it could have been worse; it could have stayed down 18% or more than it was after the first few months of last year.
The world’s major steel producing countries produced 1.22 billion tonnes of crude steel in 2009, its lowest level since 1.144 billion tonnes in 2005.
According to the World Steel Association, the full year figures again confirmed China’s utter domination of the sector.
China strengthened its position as the world’s top producer, with its production rising to a record high at 567.8 million tonnes.
That was up 13.5% from the half a billion tonnes produced in 2008.
Excluding China, the rest of the world saw a 21% slump in steel output, which is a better indication of the state of the global economy, apart from China.
China’s crude steel output in December rose 26.6% from a year earlier to 47.66 million metric tonnes.
December’s production volume was up marginally from 47.26 million tonnes in November.
In December, the country produced 88.25 million tonnes of iron ore, up 40.2% from a year earlier. In 2009 output was 880.17 million tonnes, up 8.9% on 2008.
With last year’s 13.5% increase in its output, China accounted for 46.5% of the world’s total production and is expected to again drive demand and output higher this year.
Australian output was a preliminary 5.2 million tonnes, down 31% from the 7.6 million produced in 2008 and the 7.9 million tonnes produced in each of 2007 and 2006.
World Steel said that December saw a sharp rise in year on year output in December.
That was because of the very sharp plunge in December 2008 as the global credit crunch and recession slashed demand, trade, and exports and pushed the world economy and steel into a deep hole.
In December, global output jumped 30.2% year-on-year to 106.4 million tonnes although that was down noticeably from November’s 117 million tonnes.
In 2009, the hardest-hit region in terms of production was North America, where output plunged by around 34%, with the United States seeing a drop of 36%.
Output in Europe was down 22.8%, while in South America it fell 20%.
Japan followed China as the world’s second largest producer, while Russia has taken over from the US as the third biggest producer.
That was because of the size of the fall in output in the US was greater than the 12.5% drop in Russia.
