Was 2018 as good as it gets for global steel makers – and therefore for Australian iron ore and coal exporters?
Global crude steel output jumped 4.6% in 2018, driven by strong growth in most regions especially in China, where output jumped by a previously revealed 6.6% to a new all-time high.
Data from the World Steel Association (WorldSteel, whose 64 member countries account for around 85% of world production) showed on Friday that global output reached 1.808.6 billion tonnes in 2018.
China, which produces half the world’s steel, reported all-time record output of 928.3 million tonnes last year. That came as Chinese steel mills boosted their consumption of higher grade iron ore to improve efficiency and help cut pollution.
The rise in Chinese output at a rate faster than the global industry saw its share of global crude steel production increase from 50.3% in 2017 to 51.3% in 2018.
Global iron ore prices are a good indicator of market direction and at the moment they were over $US74 a tonne last Friday and have been above the $US70 a tonne mark now for more than a month, rebounding after the brief slide in November.
This strength is being driven by the continuing demand by Chinese steel mills for higher quality ore to help in their production reduction schemes and to lower costs (ore with a higher iron content of 62% and higher produces more crude steel than ore with iron content of 60% or less).
India overtook Japan to become the world’s second-largest steel producer, lifting production by 4.9% to 106.5 million tonnes, while Japanese mills saw a 0.3% dip to 104.3 million tonnes.
All other regions recorded growth except for the European Union, where production fell 0.3% to 168.1 million tonnes in 2018 versus 2017. Germany (42.4 million tonnes), Italy (24.5 million tonnes) and France (15.4 million tonnes) were the leading producers in the EU.
Turkey’s crude steel production also stood at 37.3 million tons in 2018, down by 0.6% compared with 2017,
The US saw a 6.2% rise in output to 86.7 million tonnes amid strong economic growth and Donald Trump’s a 25% tariff on all steel imports, sparking retaliatory action the world over.
Annual crude steel production for South America was 44.3 million tonnes last year, an increase of 1.3% in 2017. Brazil produced 34.7 million tonnes, up by 1.1% compared to 2017.
The Middle East produced 38.5 million tonnes of crude steel in 2018, up 11.7% in 2017. Iran was estimated to have produced 25.0 million tonnes, up 17.7% on 2017.
Australian production jumped a solid 6.8% to 5.689 million tonnes in 2018.
Total global production in December rose 4.2% to 147.084 million tonnes
While WorldSteel doubled its 2018 and 2019 forecasts for growth in global demand for steel, a material used in everything from cars to construction, but said trade tensions were clouding the outlook.
But that might now be too optimistic.
“We’re going to see markedly weaker growth in 2019 because of weakness in demand (and) what will end up happening is due to cost pressures there’ll be closures … (mostly) from China,” said Ross Strachan, commodities economist at Capital Economics told Reuters.
Global steel share prices fell a gloomy 26% in 2018 as investors overreacted to a slight weakening in steel prices.
The fall in share prices exceeded a 4% fall in steel prices in China and a 9% gain in steel prices in the United States.
Steel prices in the United States were boosted by trade tariffs, but thanks to the lift in production, they are now below levels they were at before the tariffs were put in place last April.
