Global steel production deteriorates further

Global steel production deteriorates further

Jeffrey Landsberg from Commodore Research outlines how steel mills across the world are slashing output.

The most recently released data shows that global crude steel production outside of China totalled 70m tons in October. While this is 1.3m tons (2%) more than was produced in September, it is 4m tons (-5%) less than was reported last year for October 2018’s production. The month-on-month increase is normal and has occurred every October this decade. The year-on-year contraction, though, has marked the largest year-on-year contraction seen since November 2015.

Global crude steel production outside of China has now contracted on a year-on-year basis for four consecutive months. Also of note is that other than in India, crude steel production in October contracted on a year-on-year basis in every major steel producing nation (including China). This is a rare development that is very disturbing in regards to the global economy and is also of course a headwind for global iron ore demand.

Overall, there have been only two months so far this year where there has been any growth in global crude steel output outside of China. This remains concerning and continues to reflect weakness in the global economy outside of China (problems persist in the Chinese economy as well). In total, the first 10 months of this year have seen global crude steel production outside of China contract on a year-on-year basis by a total of 11.5m tons (-2%). And again, the production has been deteriorating in recent months, with October’s contraction the largest seen in four years.

Among the poorest performing major steel producers recently has continued to be the European Union. The European Union produced 13.3m tons of crude steel in October. This is 1.5m tons (-10%) less than was reported last year for October 2018’s production and now marks the 11th consecutive month where EU steel production has contracted on a year-on-year basis.

Also continuing to perform poorly lately has been Japan, which produced 8.2m tons of crude steel in October. This is 200,000 tons (-5%) less than was reported last year for October 2018’s production and marks the third consecutive month where Japan’s steel production has contracted.

South Korea produced 6m tons of crude steel in October. This is 200,000 tons (-3%) less than was reported last year for October 2018’s production and marks the fifth consecutive month where South Korean steel production has contracted.

The United States produced 7.4m tons of crude steel in October. This is 200,000 tons (-3%) less than was reported last year for October 2018’s production and marks the second consecutive month where US steel production has contracted.

Russia produced 6m tons of crude steel in October. This is 100,000 tons (-2%) less than was reported last year for October 2018’s production and marks the third consecutive month where Russian steel production has contracted.

Brazil produced 2.6m tons of crude steel in October. This is 500,000 tons (-16%) less than was reported last year for October 2018’s production and marks the fourth consecutive month where Brazilian steel production has contracted.

Overall, the global contraction in steel production remains concerning, as does the ongoing contraction continuing to be seen in industrial production in many major economies. We are very concerned that the global economy (both in and outside of China) will continue to deteriorate and eventually will present significant challenges to the overall dry bulk market. For now, though, the market is still able to enjoy relatively smooth sailing.

This article first appeared in the latest issue of Maritime CEO magazine, the quarterly title aimed at the top names in shipowning. To subscribe, contact grant@asiashippingmedia.com.

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