World Steel: India, South Korea Buck Global Steel Production Slowdown

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The World Steel Association (WSA) recently said that India is the silver lining in an otherwise gloomy global steel market where most of the steelmakers have come under intense pressure from the Chinese economic slowdown.

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The Association, in its Short Range Outlook (SRO) forecast issued a few days ago, forecast the demand for steel in India to go up by 110 basis points (bps) in 2015 to 7.3% and by another 30 bps in 2016. Compare this to another top producer of steel, the US, where demand continued to remain a “challenge.”

US, Chinese Consumption Falters

Crude steel production, for example, dropped 9.7% year-over-year to 7 million tons in the US in August this year, marking it the seventh straight month of decline in 2015. The WSA saw no major change in this position through the rest of the year, at least as a stronger greenback and a listless energy sector continued to weigh down the domestic steel industry. The WSA predicted steel usage in the US to drop 3% in 2015, before clawing back to a 1.3% gain next year.

Where China is concerned, the WSA said in its report that steel exports from there had risen 28% to almost 44 million metric tons in the first 6 months of 2015, despite output declining by 2%. No surprise there since China produces over half of the world’s steel, but finds domestic uptake slowing, forcing its steel companies to dump there products in foreign markets. Low local demand has started to affect steel production, so much so that in July steel production fell 3.8%.

Overall, the WSA has predicted a 1.7% drop in global finished steel demand to 1,513 mmt in 2015. Demand may increase slightly next year by just 0.7% to 1,523 mmt, as it hopes the Chinese economy stabilizes.. This iss slightly different from its April SRO forecast which said steel demand was set to grow by 0.5% in 2015 and then recover to 1.4% in 2016.

India, South Korea Buck Falling Trend

Only India and, to a certain extent, South Korea somehow managed to buck the global trend. India, in the top 5 producers of steel, had produced 91.46 mmt in the last year. According to the Brussels-based WSA, world steel production fell by 3% in August, its biggest fall this year. But India still managed to beat this trend to post a 2.8% growth in steel output as compared to the same month last year. Despite the threat of imports, India produced 7.66 mmt in August compared to 7.45 mmt in August 2014.

At 5.9 mmt, South Korea, too, posted a 4.9% growth in steel output in August as compared to the same month a year ago. In July, the country posted a 1.7% growth in steel production to 6 mmt in the month.

South Korea today has a high-per-capita steel consumption of steel, over 1,000 kg of finished steel per person. By comparison, China’s is half as much per capita. To a large extent, by virtue of it being 1 of the world’s largest automobile maker,s South Korea consumes a lot of auto grade steel. Shipbuilding remains another major source of South Korean steel demand.

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The WSA report is based on data collected from 65 countries, representing about 98% of the global steel production.

The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.

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