Global Steel Production (Aug.) - Capital Economics
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Global Steel Production (Aug.)

Metals Data Response
Written by Samuel Burman
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Global steel production continued to recover in August. However, new regulatory measures affecting the property market in China – along with the re-introduction of virus-related restrictions elsewhere – could soon weigh on demand, which would reduce the incentive to bring back output.

Headwinds rising for global steel production

  • Global steel production continued to recover in August. However, new regulatory measures affecting the property market in China – along with the re-introduction of virus-related restrictions elsewhere – could soon weigh on demand, which would reduce the incentive to bring back output.
  • According to the World Steel Association (WSA), global steel production rose by 0.6% y/y in August (see Chart 1), the first y/y increase in output since February. Nevertheless, global production is still down by 4.1% y/y year-to-date. (See Table 1.) As has been the case for some time, almost all of the growth in global steel production in August took place in China.
  • Steel output growth in China was up 8.4% y/y in August, which is slightly lower than the 9.1% rise a month earlier. The ramp up in infrastructure spending by provincial governments has boosted steel demand, which has in turn incentivised supply. However, while steel demand from China’s infrastructure sector is set to remain strong in the coming months, we suspect that this will be partially offset by weakness in the property sector. Regulatory authorities look set to introduce tighter lending criteria to developers soon and this is likely to curb property investment. (See our China Economics Weekly.)
  • Meanwhile, steel production outside of China slipped to 61.4m tonnes in August, from 61.5m in July, and we expect that it will remain in the doldrums until at least the end of the year in part because demand remains weak. In fact, production outside China could even fall further in the coming months as the recent re-introduction of virus-related quarantine measures in Europe, India and elsewhere could lead to a renewed slump in the demand for steel.
  • All in all, despite the strength in China’s steel production, we don’t think that it will be enough to prevent a fall in global output in 2020.

Chart 1: Steel Production (y/y % Change)

Sources: World Steel Association, Capital Economics

Table 1: Steel Production

US

India

China

Japan

Europe

World

Aug. 2020 (Mn. Tonnes)

5.6

8.5

94.8

6.4

12.4

156.2

% y/y change

-24.4

-4.4

8.4

-20.6

-7.7

0.6

Jan. – Aug. 2020 (Mn. Tonnes)

47.4

61.1

690.8

54.7

108.2

1189.8

% y/y change

-19.8

-18.8

3.9

-19.0

-14.6

-4.1

Sources: World Steel Association, Capital Economics


Samuel Burman, Assistant Commodities Economist, samuel.burman@capitaleconomics.com