As the Chinese economy weakens and Europe continues to struggle, the global market for steel – a key input in manufacturing and construction – continues to deteriorate as production levels contract, oversupply worsens and prices fall, the latest report indicates.

At 123.7 million tonnes, the overall volume of crude steel produced throughout the world last month was down by 1.7 per cent when compared with the same month last year according to the August 2012 Crude Steel Production report from the World Steel Association (WSA).

Although production levels remain reasonably high in a historic context – volumes are up 9.1 per cent over the same month in 2010, for example – overall levels of output for the first eight months of this year are up only 0.9 per cent compared to the same period last year, indicating that any long-term rise in production has slowed.

Making mattes worse, prices continue to fall amid rising levels of stock. At 730, the All Products Global Composite Steel Price came in lower in August than at any other time over the past two years.

That price drop comes because, despite the pull-back in production, the world remains awash in steel. With a global capacity utilisation ratio of just 75.5 per cent (down from 78.7 per cent in August, 2011), the world is using only three quarters of the steel it produces.