Iron ore price volatility continues

Another wild day for the iron ore market with 12m swaps reversing spectacularly, spot showing less trouble and Chinese steel prices firming up.  So long as the rally in Chinese steel prices persists so too will the ore price.

And on that front, the World Steel Association released its August figures today:

Brussels, 20 September 2012 – World crude steel production for the 62 countries reporting to the World Steel Association (worldsteel) was 124 million tonnes (Mt) in August 2012, a decrease of -1.0% compared to August 2011.

China’s crude steel production for August 2012 was 58.7 Mt, down by -1.7% compared to August 2011.

Elsewhere in Asia, Japan produced 9.2 Mt of crude steel in August 2012, an increase of 3.3% compared to the same month last year. South Korea’s crude steel production for August 2012 was 5.7 Mt, up by 2.8% compared to August 2011.

In the EU, Germany produced 3.4 Mt of crude steel in August 2012, a decrease of -7.1% on August 2011. Italy’s crude steel production for August 2012 was 1.2 Mt, down by -15.5% compared to August 2011. In August 2012, Spain produced 1.0 Mt of crude steel, -10.3% lower than August 2011. France’s crude steel production for August 2012 was 1.0 Mt, a decrease of -7.2% on August 2011.

Turkey’s crude steel production for August 2012 was 3.0 Mt, an increase of 8.7% compared to August 2011.

In August 2012, Russia produced 5.8 Mt of crude steel, an increase of 1.8% compared to the same month last year. Ukraine’s crude steel production for August 2012 was 2.7 Mt, -13.5% less than August 2011.

The US produced 7.5 Mt of crude steel in August 2012, up by 1.2% on August 2011.

Brazil’s crude steel production for August 2012 was 2.8 Mt, down by -6.2% compared to August 2011.

The crude steel capacity utilisation ratio for the 62 countries in August 2012 declined to 75.5% from 79.4% in July 2012. Compared to August 2011, it is 3.2 percentage points lower.

So, a few points. Pretty clearly, production is weak and weakening in the major economies outside of the US. The big fall in Chinese output shows the inventory cycle is well under way there.  There does tend to be a seasonal dip for production as the year wears on but the downwards trajectory of capacity utilisation looks pretty steep for global production.

There is not much hope for iron ore prices beyond the current Chinese inventory cycle in this data.

Comments

  1. Could you see a scenario where steel prices were rallying due sharp cutbacks in production, but IO prices were falling due to the decline in demand?