No Sign of a Slowdown in Global Steel Production

Written by Peter Wright

Steel production in China continues to outpace other nations. China’s steel production grew eight times faster than production in the rest of the world in the three-month period from August through October, according to the latest Steel Market Update analysis of World Steel Association data.

Global steel production in October hit an annual rate of 1.879 billion metric tons. Capacity is calculated to be 2.4 billion metric tons and capacity utilization in October was 78.5 percent. In three months through October, China grew by 11.4 percent year over year as the rest of the world grew by 1.4 percent. In 2018, China has increased its share of global steel production, which reached 52.7 percent in October.

Figure 1 shows annualized monthly production on a three-month moving average (3MMA) basis and capacity utilization since January 2000. May through October were the first months for the annualized production rate to exceed 1.8 billion metric tons. On a tons-per-day basis, production in October was 5.051 million metric tons, another all-time high. September and October were the first months ever to exceed five million tons per day.

On average, global production on a tons-per-day basis peaked in the early summer in the years 2010 through 2016, but last year the second half downtrend was delayed until November and in 2018 there is still no sign of a slowdown. Figure 2 shows the average tons per day of production for each month since 2008. On average, October declined by 1.92 percent. This year, October increased by 0.1 percent.

Figure 3 shows the year-over-year growth rate of global production on a 3MMA basis since January 2005. Growth in three months through October was 5.2 percent. Growth has exceeded 5 percent in seven of the first 10 months of 2018.

Table 1 shows global production broken down into regions, the production of the top 10 nations in the single month of October, and their share of the global total. It also shows the latest three months and 12 months of production through October with year-over-year growth rates for each period. Regions are shown in white font and individual nations in beige. The world overall had positive growth of 6.5 percent in three months and 5.2 percent in 12 months through October. When the three-month growth rate exceeds the 12-month growth rate, as it did each month June through October, we interpret this as a sign of positive momentum. These were the first months of positive momentum since October last year. On the same basis in October, China grew by 11.4 percent and 7.8 percent, respectively. The European Union, Other Europe and the CIS all had negative growth in three months through October. All regions had positive growth in 12 months year over year. Table 1 shows that North America was up by 5.3 percent in three months. Within North America, the U.S. was up by 8.3 percent, Canada was down by 6.9 percent and Mexico was up by 1.6 percent. (Canada and Mexico not shown in Table 1.)

In the 12 months of 2017, 115.3 million metric tons were produced in NAFTA of which 70.8 percent was produced in the United States, 11.9 percent in Canada and 17.3 percent in Mexico.

Figure 4 shows China’s production since 2005 and Figure 5 shows the year-over-year growth. China is increasingly dominating the global steel market and is approaching an annual rate of one billion tons of crude production. WSA is forecasting a deceleration in China’s steel production growth in 2019. The chairman of the World Steel Economics Committee stated recently that China is expected to experience zero growth in 2019, down from 6 percent this year, partly as a result of trade tensions with the U.S.

The October WSA Short Range Outlook (SRO) for apparent steel consumption in 2018 and 2019 is shown by region in the graphic below. WSA forecasts global steel demand will reach 1,657.9 million metric tons in 2018, an increase of 3.9 percent over 2017. In 2019, global steel demand is forecast to grow by 1.4 percent, reaching 1,681.2 million tons. The next forecast will be released in April 2019. (Note, the essence of this piece is crude steel production; therefore, the numbers are greater than for steel consumption, which relates to rolled products.)

Commenting on the outlook, WSA’s Economics Committee chairman said, “The outlook for steel demand in the U.S. remains robust on the back of strong economic fundamentals.”

SMU Comment: Trends have been consistent in recent months as the growth of China’s steel production continues to surpass the rest of the world. It seems to us that repeated statements by those who should know about the impending cessation of China’s growth are nonsense. New plants are coming on stream and almost all of these are BOF-based, according to the August report by the OECD Steel Committee. For years now, we’ve been reading about China’s intent to reduce steel production. The remarks from the World Steel Association reported in this piece are typical. The fact is, it isn’t happening! China’s production is growing over eight times as fast as the rest of the world. In its October projection for global growth in 2018 and 2019, the IMF anticipates a 3.7 percent rate in 2019. This is well in excess of the 2.2 percent necessary to generate a continued growth in global steel demand.

This analysis is based on data made public monthly by the World Steel Association. The WSA is one of the largest industry associations in the world. Members represent approximately 85 percent of the world’s steel production, including over 160 steel producers, national and regional steel industry associations and steel research institutes.

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