World steel production continues to fall and in August hit its lowest level for six months.
The World Steel Association said this week that world steel output dropped 1.7% in August from July to 112.8m tonnes and down from June when nearly 119 million tonnes was produced.
August’s output was still 4% above a year ago, but the gap between output this year and 2009 continues to narrow.
But while steel output has slowed this year in response to falling demand, major steel producers in Europe, China, South Korea and the US are about to start lifting prices by 5%-12% on some major sellers in the next month.
When price rises of this range and geographic spread start being announced, it’s a sign producers see demand strengthening, not falling, even though the crude steel production figures suggest otherwise.
Worldsteel said August’s crude steel production reached nearly the same level as in August 2008, before the impact of the global economic downturn was felt.
But while China, Turkey and Iran showed higher outputs in August 2010 versus the same month in 2008, the US, Germany, Italy, Brazil and Japan have yet to return to pre-crisis levels.
The best gauge of the way the industry is going collectively is the capacity utilisation figure, which is now at its lowest for more than a year (compared to output being at its lowest since February).
World Steel said that the world crude steel capacity utilization rate of the 66 countries surveyed was 73.1%, the lowest level in 2010, down from 74.4% in July and down 1.1 percentage points lower than August 2009.
But if Chinese steel production was excluded, the fall in global output would rise to nearly 3%, month on month.
China produced 51.6 million tonnes (mt), a six month low in August and around 10,000 tonnes less than the July figure (and it also cut iron ore imports to 44 million tonnes in August, down 16% from the previous month).
August was the third consecutive month in which world crude steel output saw a month-on-month fall.
August production was 12 million tonnes, or 10% under the peak just over 124.5 million tonnes in May.
In Asia, besides China, Japan produced 8.9 million tonnes (mt) in August, up 7.1% year on year. South Korea’s crude steel output rose 6.4% to 4.5 mt.
Meanwhile, the US produced 6.9 mt of crude steel, 23.7% more than in August 2009.
The EU saw its crude steel output gain 15.4% to 12.1 million tonnes. Germany, the EU’s biggest steelmaker, saw production total 3.5 million, an increase of 17.1% from August 2009.
Spain’s production rose 0.2% to 1.1 million tonnes, while in Italy the annual gain was 45.4% to 1.1 million.
Turkey’s production increased 11.3% year on year to 2.5 million tonnes
And Brazil’s crude steel output was at 2.9 million tonnes, 7.8% more than in August 2009.
Interestingly Russia has now slipped to fifth place among steel-producing countries, behind India.
The August figures show Russia produced 5.6 million tonnes of crude steel, while India made 5.7 million tonnes.
In the first eight months of the year, Russia raised output to 43.9 million tonnes, 15% more than a year earlier.
But US output was up 56% to 54.5 million tonnes and Indian output was up 8.3% at 44.6 million tonnes.
Australian production was 669,000 tonnes in August, up from 665,000 tonnes in June and the highs for more than a year.
It was 511,000 tonnes in August 2009, when output was held down by the relining work at the Number 5 blast furnace in Port Kembla
World Steel said that in the first eight months of 2010, global crude production was 931.9 million tonnes 21.9% more than in the first eight months of 2009.
Meanwhile, ArcelorMittal, the world’s biggest steelmaker, said this month it would raise European prices by 5% from October to pass on higher raw-material costs.
Baoshan Iron & Steel, China’s biggest publicly traded steelmaker, said last week it was increasing October prices for its benchmark products for the first time in five months, with increases of
12% for steel plate mentioned in trade reports.
Other producers reported to be lifting product prices include India’s Tata Steel (In Europe), Germany’s Thyssen Group, South Korea’s Posco and US group, AK Steel.
The price rises are not across the board, just selected, best selling products.
In China the prices of 12 leading steel products will rise, in the US, it’s five, according to the trade, and four in Italy.
The sustainability of these price rises depends on Chinese production.
If they stick, producers may be encouraged to keep capacity utilisation at current levels to try and rebuild margins hit by the sharp rise in iron ore prices this year.
But iron ore prices will be down 13% in the next quarter and coal prices will fall as well and this could encourage Chinese mills to start increasing production again.
