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Global Steel Production and Capacity Utilization in April 2015

May 19, 2015

Global steel production in 12 months through April totaled 1.624 billion tonnes with a capacity of 2.2 billion tonnes which yields a utilization for the 12 month period of 73.8 percent. China accounted for 50.9 percent of global production in April. Asia as a whole, including India, accounted for 68.4 percent.

Production in April on a tons/day basis was 4.52 million tonnes, up from 4.44 in March. This was the highest tons per day month since last June but the seasonal pattern evident since the recession is different in 2015. Total April production was 133,485 million tonnes. If we look at the three month moving average and plot it over time we see that there has been a significant decline in the second half of the year since and including 2010 which usually extends into February, after which production kicks up rapidly (Figure 1).

This is not happening in 2015 through April. As production has increased each year since the recession, capacity utilization has decreased, the gap is widening and has been estimated that surplus capacity is currently as much as 500 million tons per year, well over half of which is in China.

Table 1 shows global production broken down into regions and also the production of the top ten nations in the single month of April and their share of the global total. It also shows the latest three months and twelve months production through April with year over year growth rates for each. Regions are shown in white font and individual nations in beige.

If the three month growth rate exceeds the twelve month we interpret this to be a sign of positive momentum and accelerating growth. The reverse is the case today for all regions except South America which has negative growth but a slight positive momentum. Comparing the three months through April in 2014 and 2015, the only nations in the top 10 to have positive growth were Russia and India with 4.5 percent and 6.2 percent respectively. China was down by 1.1 percent. North America was down by 9.4 percent in total with the US down by 11.1 percent, Canada down by 0.6 percent and Mexico down 6.3 percent. The European Union was down by 0.5 percent and other Europe led by Turkey was down by 4.3 percent. The effect of the war in Ukraine is clear in the contraction of that country’s steel production. Figure 2 shows the 3MMA of the monthly year over year growth of global steel production which was negative in March for the first time since September 2009.

April was down by 2.1 percent year over year. On a three month moving average basis, global growth has contracted for five straight months from positive 1.4 percent in December to negative 2.1 percent in April. The growth rate in twelve months through April 2015 was 0.6 percent compared to twelve months through April last year.

Last month we published the latest World Steel Association Short Range Outlook forecast for apparent steel consumption in 2015 and 2016. We are re-publishing it here for those readers who may have missed it and because as we stated last month the forecast for 2015 looks optimistic and that is increasingly the case (Table 2). Note that this is steel consumption, not crude steel production which is the main thrust of this piece.

WSA are forecasting a 0.5 percent growth in demand this year followed by 1.4 percent in 2016. Based on this analysis by the WSA, NAFTA has by far the largest deterioration in demand between 2014 and 2015. We still think this forecast looks pessimistic for NAFTA. We read the global trends as worse that the WSA forecast suggests and the NAFTA trend as better. The recent decline in the price of oil, of iron ore and of the Baltic Index suggests that the global economy is weakening. Certainly there is a supply side to all three of those measures but it seems that demand is also down and suggests a further slowdown in global steel production in 2015.