Global crude steel production continues its downward spiral with output falling for the third straight month in May on declines across all major producers barring India – according to the latest monthly report from the World Steel Association (“WSA”). The beleaguered steel industry continues to reel under sluggish demand in China – the world’s top steel consumer.
The international trade body for the iron and steel industry said that crude steel production for 65 reporting nations shrank 2.1% year over year to 139.3 million tons (Mt) in May. This follows a 1.7% decline in April that also saw lower production across all key producers except India. Steel production for the first five months also fell 1.9% to 675.6 Mt.
The May reading for Asia showed lower output in China, Japan and South Korea that more than offset a rise in India, leading to a 1.8% drop in overall output for the region to 94.6 Mt.
Steel production in China – the world's biggest steel maker – went down 1.7% year over year to 70 Mt in the reported month after falling 0.7% in April. China continues to see lower output as a slump in the country’s housing market, persisting credit crunch and weak infrastructure investment continue to weigh on steel demand there.
Sluggishness in the world’s second-largest economy is further evident from contraction in its manufacturing sector for the fourth consecutive month in June. The HSBC Purchasing Managers' Index (PMI) showed a preliminary reading of 49.6 for the month, indicating subdued demand. A reading less than 50 indicates contraction in manufacturing activity.
Output also contracted 7% to 8.9 Mt in Japan – the second-largest producer. India retained its place as the third-biggest steel maker with a production of 7.7 Mt. of crude steel for the month, a 4% gain. Production in South Korea fell 2.6% to 6 Mt.
In North America, crude steel production slid 8.5% year over year to 6.8 million tons in the U.S. (the fourth-biggest producer), marking the fourth straight month of decline this year. The U.S. steel industry remains rattled by a torrent of unfairly traded imports. Output in Canada, however, jumped 8.3% to around 1.2 Mt. Overall production for the region dropped 6.7% to roughly 9.5 Mt.
The Europe Union (EU) saw a meager 0.7% rise in production to around 15.1 Mt in the reported month. Output slipped 5.4% to around 3.7 Mt. in Germany – the biggest producer in the region. Production tumbled 12.6% in Italy to 2 Mt while rising 1.9% in Spain to around 1.4 Mt. Production climbed 5.8% and 10.2% in France and the UK, respectively, to around 1.4 Mt and 1.1 Mt, respectively.
Production in the Middle East edged up 0.6% to 2.5 Mt with Iran gaining 2.4% to 1.5 Mt. Output in Africa also clipped 2.2% to 1.1 Mt in the reported month.
Among other notable producers, production from Turkey went down 4.3% to 2.9 Mt. Russia logged a 1.9% decline to 6.1 Mt while Ukraine saw a 23% plunge in output to 2.2 Mt, leading to a 7.6% decline in overall production in the C.I.S. region to around 9 Mt. Production from Brazil, the biggest producer in South America, went up 3.8% to around 3 Mt.
Per WSA, crude steel capacity utilization ratio for the reporting countries was 72.1% in May, down from 75.5% a year ago and 72.5% in April 2015.
The outlook for the steel industry calls for deceleration in global demand growth this year. The WSA expects global apparent steel use to rise 0.5% in 2015 after a 0.6% growth last year. Recovery in the Eurozone economy and encouraging steel usage trends in certain developing economies including India is expected to be masked by slowdown in China.