Economy

Global Steel Production: China Still Leads the Way

March 1, 2019

Global steel production in January was at an annual rate of 1.760 billion metric tons (Mt). Capacity is calculated to be 2.4 billion Mt and capacity utilization in January was 74.0 percent, according to the latest Steel Market Update analysis of World Steel Association data. In three months through January, China grew by 7.8 percent year-over-year as the rest of the world contracted by 0.3 percent. In 2018, China increased its share of global steel production, which in January was at 51.1 percent.

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 Mt. Production annualized in January fell back to 1.76 billion Mt. On a tons-per-day basis, production in January was 4.732 million, down from an all-time high last June of 5.071 million Mt.

On average, global production on a tons per day basis peaked in the early summer in the years 2010 through 2016, but in 2017 and 2018 the second half downtrend was delayed until the fourth quarter on a 3MMA basis. Figure 2 shows the average tons per day of production for each month since 2008. On average, January increased by 3.26 percent. This year, January declined by 1.97 percent.

Figure 3 shows the year-over-year growth rate of global production since January 2005. Growth in three months through January was 3.7 percent, down from 5.2 percent in November. Note, this is not a seasonal effect as we are considering year-over-year changes.

Table 1 shows global production broken down into regions, the production of the top 10 nations in the single month of January, and their share of the global total. It also shows the latest three months and 12 months of production through January 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 3.7 percent in three months and 4.4 percent in 12 months through January. When the three-month growth rate is lower than the 12-month growth rate, as it was in January, we interpret this to be a sign of negative momentum. On the same basis in January, China grew by 7.8 percent and 6.8 percent, and therefore had positive momentum. All regions except North America and Asia had negative growth in three months through January year-over-year. Table 1 shows that North America was up by 7.2 percent in three months. Within North America production in the U.S. was up by 11.2 percent, in Canada was down by 0.7 percent and in Mexico was down by 3.2 percent. (Canada and Mexico are not shown in Table 1.)

Last month we included Figure 4 and are showing it again because it is so dramatic. It is copied from the WSA website and shows the distribution of steel production in the regions of the world in 2017 and 2018.

In the 12 months of 2018, 119.9 million metric tons were produced in North America of which 72.3 percent was made in the U.S., 10.9 percent in Canada and 16.8 percent in Mexico.

Figure 5 shows China’s production since 2005 and Figure 6 shows the year-over-year growth. China is increasingly dominating the global steel market and will likely have months in 2019 when the annualized rate will exceed one billion metric tons of crude production. The 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 in 2018. This is partly a result of trade tensions with the U.S., he reported.

The October 2018 WSA Short Range Outlook (SRO) for apparent steel consumption in 2018 and 2019 is shown by region in the graphic below. The WSA forecasts global steel demand will reach 1,657.9 Mt in 2018, an increase of 3.9 percent over 2017. In 2019, it is forecast that global steel demand will grow by 1.4 percent to reach 1,681.2 Mt. 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, the chairman of the WSA economics committee said, “The outlook for steel demand in the U.S. remains robust on the back of the strong economic fundamentals.”

SMU Comment: The rest of the world had negative year-over-year growth in steel production in three months through January, but China kept on rolling along. We don’t believe the WSA projection of zero growth in China’s steel production in 2019, but hope we are wrong. New plants are coming on stream in China and almost all of these are BOF-based, according to the August report by the OECD Steel Committee.

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.