Slowly, the recovery in global steel is fading as the momentum goes out of the restocking boom, car sales peak in some countries and weaken in others, and the US Japanese and European economies stumble downwards.
But it’s China’s slowdown however which is starting to play a major part in the slowing growth in world steel output.
That will be the greatest influence on whether the steel industry continues to rebound from the depression in the end months of 2008 and early 2009, or whether it stalls as we head towards 2011.
Already Chinese steel production has fallen in June and May; iron ore imports are off as steel groups use up stocks and await a fall in contract prices to result from the 40% fall in spot prices since April.
In fact, iron ore spot prices (Fe62%, delivered China, Tanjin) fell for a 15th straight day yesterday.
According to the Steel Index, the price fell 3% to $US118.10 a tonne, the lowest this year and the lowest since December 29.
Falling Chinese industrial production (linked to the slowing housing, construction and car sectors) is a factor, as are price rises from steelmakers trying to recovery the sharp rise in iron ore and coal prices this year.
And that is starting to have an impact in other steel producing countries in Asia.
This week we saw reports that Japanese giants, Nippon Steel Corp. and JFE Steel Corp., plan to cut domestic crude steel production due to waning exports to China.
Nippon Steel will cut output by about 5% in the quarter ending in September, while JFE may cut output by between 300,000 and 500,000 tonnes in the same period.
As over half Japanese exports now go to China, it is a sign that the slowdown on the mainland is becoming very real.
The cuts came as figures from the World Steel Association (Worldsteel) showed another mostly solid month of production in June.
Worldsteel said that production for the 66 countries reporting to the World Steel Association was 118.75 million metric tonnes (mmt) in June, up 18% higher than June 2009, but down 4.67% on May and the lowest since February when much of Asia’s production was constrained by the Lunar New Year holidays.
But there were signs that the industry is finding it harder to push production higher as capacity utilisation fell for a second month.
The world crude steel capacity utilisation ratio of the 66 countries in June 2010 declined again to 80.6% from 82.0% in May 2010 and 82.6% in April, which is now looking like the peak in this rebound (See the above Worldsteel graph).
Compared to June 2009, the utilisation ratio in June 2010 was up 8.3%, but it remains well under the boom peak in 2007 of around 90.6%, so there is still substantial production slack in the sector.
Over the six months to June, Worldsteel said global output was 706 million metric tonnes (mmt), up 27.9% on the same period of 2009.
The rebound was evenly spread with all the regions showing increased crude steel production during the first half of 2010 compared to the first half of 2009.
First half production this year was also up 7.2% on the same period of 2007, just before the global economic crisis hit.
But Worldsteel pointed out that the recovery is not as evenly spread on this comparison.
"Most of the world has not recovered to pre-crisis levels," the group reported this week.
"Only Asia and the Middle East showed increased crude steel production compared to the first six months of 2007.
"Crude steel production in the EU, CIS, US and Canada is still more than 15% below 2007 levels."
Looking at June, Worldsteel said China’s crude steel production for June 2010 was 53.8 mmt, an increase of 9% compared to June 2009, but down on May’s 56.1 million tonnes and the lowest level since February.
Chinese first half output this year was 323.17 million tonnes, up 21% from last year and 34% from the 240.1 million tonnes produced in the first half of 2007.
Elsewhere in Asia, Japan produced 9.4 mmt of crude steel in June 2010, up 35.9% compared to the same month last year (but down 3.8% from May). South Korea’s crude steel production for June 2010 was 4.8 mmt, 21.9% up compared to the same month last year, and down from May.
In the EU, Germany’s crude steel production for June 2010 was 3.9 mmt, an increase of 53.4% on June 2009. Italy produced 2.3 mmt, 32.8% higher than the same month in 2009. France produced 1.5 mmt of crude steel in June 2010, an increase of 31.4% compared to June 2009.
But EU output in June was down sharply, 1.3 million tonnes, from May as widespread cuts occurred in most producers. German, French and Italians producers, in particular, made sharp cuts.
And at 90 million tonnes, output in the six months to June this year was up on the 62.2 million produced in the first half of last year, but 15% down on the level (108.4 million tonnes) in the same period of 2007.
Turkey produced 2.5 mmt of crude steel in June 2010, 13.8% higher than June 2009. Russia produced 5.4 mmt of crude steel in June 2010, a 6% increase over the same month in 2009 and Ukraine’s crude steel production for June 2010 was 2.5 mmt, up 7.2% compared to the same month last year.
UK production in June was down 2.3% from June last year and down sharply from June 2007.
But over the six months, UK steel output was 5.14 million tonnes, 16.8% up this year on the same period of 2009 (4.4 million tonnes), but off a whacking 30% from
