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Global, China steel output growth slows in November


Post Date: 21 Dec 2013    Viewed: 371

Global steel production growth in November was at its slowest in four months as China put the brakes on output to respond to weaker prices and excess supply and as the government in the top steel producer takes some action against pollution.


World steel output rose by 3.6 percent in November from the same month last year to 127 million tonnes while China registered a 4.2 percent increase, data from steel producers association Worldsteel showed on Friday.


For China this was the lowest year-on-year growth since September 2012 and follows strong output increases in the first 10 months of the year.


Output growth in Japan, Europe and the United States however outpaced that of China, due to an improvement in prices in these regions in the last few months but from very low levels.


"A fall in global output growth in November reflects lukewarm finished steel demand, though some pockets of relative strength have been seen: the construction sector in the U.S. and Japan's manufacturing industry," said Chris Houlden, an analyst at steel consultancy CRU.


"As well as efforts to control output and pollution, a fall in production in China just as much reflects a lacklustre domestic market: a slowdown in construction activity in the North, lack of appetite to restock and poor market sentiment."


Chinese production had hit year-on-year growth levels as high as 12.8 percent in August this year but the country is grappling with an estimated overcapacity of 200 million to 300 million tonnes.


The excess supply is keeping prices under check and squeezing margins but the state has so far supported many steel mills, even if unprofitable, in order to sustain employment levels and head off social unrest.


"The issues of low prices and margins for Chinese producers is not really one of lack of demand growth, but perennial excess capacity and pressures to maximise output which are not related to maximising economic profit," Houden said.


"The intention to make efforts to tackle this, not least from a pollution control perspective, has been signalled again this year, however."


China said recently it might shut down some steel mills as it steps up its fight against air pollution but many in the industry think it will take years before it delivers meaningful cuts.


As the steel markets enter a seasonally slow period for demand, stock levels could rapidly build forcing steelmakers in China to pare crude output in the coming months, according to Sucden metals analyst Kashaan Kamal.


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Japan, the world's second-largest steel-producing nation, posted strong growth of 8.9 percent to 9.3 million tonnes in November from the same month last year, helped by a weaker yen boosting its exports.


In both the EU and the Unites States growth was up 5.3 percent in the same period to 14.3 million tonnes and 7.1 million tonnes, respectively.


"The end of 2012 was a dire moment in the European steel market while we are seeing a bit of stability in the back-end on 2013," steel analyst Jeremy Platts at Meps consultancy said.


"In the United States things are looking better: things have started to pick up demand wise and prices have started to rise." In other main producing nations, steel output fell by 2.4 percent to 6.2 million tonnes in India and by 0.2 percent to 5.6 million in South Korea.


The CIS (Commonwealth of Independent States) had a 2.5 percent drop in production to 8.6 million tonnes while Turkey saw a 3 percent upswing to 3.1 million.


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