World steel growth stalled

Overnight, the World Steel Association released it production figures for May and was more zombie growth:

World crude steel production for the 62 countries reporting to the World Steel Association (worldsteel) was 131 million tonnes (Mt) in May 2012, an increase of 0.7% compared to May 2011.

China’s crude steel production for May 2012 was 61.2 Mt, an increase of 2.5% compared to May 2011.

Elsewhere in Asia, Japan produced 9.2 Mt of crude steel in May 2012, up by 2.0% compared to the same month last year. South Korea’s crude steel production for May 2012 was 6.0 Mt, an increase of 2.0% compared to May 2011.

In the EU, Germany produced 3.7 Mt of crude steel in May 2012, a decrease of -9.7% on May 2011. Italy’s crude steel production for May 2012 was 2.6 Mt, down by -3.3% on May 2011. In May 2012, France produced 1.5 Mt of crude steel, up by 1.3% compared to May 2011. Spain’s crude steel production for May 2012 was 1.3 Mt, -13.9% lower than May 2011.

Turkey’s crude steel production for May 2012 was 3.1 Mt, an increase of 6.6% compared to May 2011.

The US produced 7.7 Mt of crude steel in May 2012, up by 7.4% on May 2011.

Brazil’s crude steel production for May 2012 was 2.9 Mt, -11.7% lower than May 2011.

The world crude steel capacity utilisation ratio for the 62 countries in May 2012 slid to 79.6% from 81.3% in April 2012. Compared to May 2011, it was 1.4 percentage points lower. During the past 18 months, the ratio was at its highest in April 2011 with 82.8% and the lowest ratio was in December 2011 with 70.7%.

This is crappy growth. The past four years have seen May Chinese growth rates of 10.5%, 0.6%, 20.7%, 7.8% and world growth of 5.8%. -21%, 29.1%, 4.2%. Also below find a chart of the IISI global steel production over the long term:

You can see the amazing period of growth we’ve just enjoyed, as well as the rounding off beginning at the top. In terms of more immediate concerns, the technicals look pretty good for iron at the moment with a nice base in place for prices, swaps and Chinese steel:

But unless Europe injects growth, the rally looks to have nowhere to go in a hurry.

David Llewellyn-Smith

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

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Comments

  1. Tiges in 2012

    Have Bloomberg changed their iron ore ticker symbol? The link on the right no longer leads to the iron ore chart.

    • That’s strange, its working on my Bloomie. I tried the OREXI12M Index – thats the 12m Singapore swap – and its not showing up either, on the public Bloomie at least. Hmm

      • Yeah – what is that meant to mean ?

        As far as I’m concerned its tanking. The price point of profit after investment is a dollar (I know this is in dispute).

        • Tiges in 2012

          As far as I’m concerned its tanking. The price point of profit after investment is a dollar (I know this is in dispute).

          Is this a typo? One dollar?

      • Alex Heyworth

        True, but nobody expected it to stay at $180 for long. $130+ is still a very good return for miners.

    • Not really Alex – thus far, demand for ore has held. China’s steel production grew 2.5% for the month, a small increase, but an increase nonetheless.

      Recently advised emphasis on infrastructure development by the Chinese provides further stability and ideally indicative of continued demand – all good news for Australia. Long may it last.

      • 30 years ago you would have had a point that “steady” was ok, but you clearly have no understanding of the importance of rate of change in maintaining bubbles and ponzi finance, which is what the world is currently grappling with.

        From a profit point of view it might be “ok” for the major miners (your bosses?), but do you really think markets will be happy with “flat” profits from them for the few years?

        It is also by no means clear that it will plateau at these levels. In fact I very much doubt it will. As Dave Rosenberg has pointed out, economies are either accelerating or decelerating, they are only ever in equilibrium momentarily. So of course China could stoke the fires again and make you a happy chap for a while, but as the credit demand graph in Phat Dragon showed yesterday, the Chinese are also up to their eyeballs in debt.

        To understand the concept of a slowdown of a major economic growth component think about what happens if you are driving on a busy three-lane freeway at 100km/h and you steadily break to slow to 60km/h and then 40km/h. Of course a few cars would dodge you but before long there would be a major backup. Well that’s what is happening all over the world now,and the bumper-bashings that maker it worse are just starting.