Global steel output demonstrates recovery's fragility
Monday, 02 April 2012 | 11:00
The daily rate of global crude steel production rose slightly in February from a month earlier, helped by a seasonal demand pick-up in top producer China, according to a Reuters calculation based on data released by an industry body.
When the figures take into account the extra day in February 2012 compared with 2011, however, both Chinese and global daily steel production were down slightly last month compared with February 2011, showing the sector continued to suffer from the uncertain economic situation.
"There are definitely positive signs in some parts of the world, namely China and the USA. However, other major countries are still falling short of their potential and are still disappointing on the downside," said Denny Sabah, an analyst at trading house Ronly.
"The steel sector is slowly getting back on its feet; it still though has quite some way to go, and it is as regionally diverse as ever," he added.
The global steel capacity utilisation rate was at 79.7 percent in February 2012, up 3.1 percent from January but down 2.8 percent from February 2011, data from the World Steel Association showed.
An increase in daily Chinese production to 1.9 million tonnes in February from 1.8 million in January was largely due to a seasonal demand increase, but analysts warned that production growth in the Asian country would be lower this year.
"While Chinese momentum continues to improve into March as seasonal construction returns ... China's year-on-year growth rates in February actually fell slightly, in sharp contrast to the 8 to 10 percent growth rates we have enjoyed across the past decade," said Melinda Moore, a principal of CleanUP Commodities Research.
Steel consultancy Meps said double-digit growth would be out of question for this year and forecast a 7.5 percent increase in Chinese apparent consumption, down from about 10 percent last year.
The United States, the world's largest economy, recorded a slight pick-up in daily production levels in February compared with January, helped by restocking.
"In the U.S., we expect to see modestly higher production in March on the back of stronger sheet demand and recently announced sheet price hikes," Michelle Applebaum, an analyst with Steel Market Intelligence, said in a note.
Daily steel production in the European Union was also slightly up in February from the previous month but was still below the rate registered in February 2011.
As the list of European steel plant closures lengthens and demand remains subdued, it is difficult to imagine a strong pick-up in this area in the near future, analysts said.
The latest blow to confidence was the announcement from the world's largest steelmaker, ArcelorMittal, that it would extend the closure of its electric arc furnace in Schifflange, Luxembourg, indefinitely.
"In Europe the financial crisis is still weighing, and restocking hasn't been as pronounced as in the U.S.," said Kaye Ayub, steel and iron ore consultant at Meps.
"Globally the situation in the steel market is still quite fragile as a lot of the increases seen in the U.S. and some other countries are mainly because of restocking rather than end-user demand."