Global Steel Production (Apr.) - Capital Economics
Metals

Global Steel Production (Apr.)

Metals Data Response
Written by Kieran Clancy

The latest data add to the evidence of a growing divergence in the trend in steel output between China and the rest of the world. And as infrastructure spending in China is stepped up over the coming months, we suspect that the gap between the two will widen further.

China’s dominance over global steel supply to grow

  • The latest data add to the evidence of a growing divergence in the trend in steel output between China and the rest of the world. And as infrastructure spending in China is stepped up over the coming months, we suspect that the gap between the two will widen further.
  • The latest data from the World Steel Association are a sight for sore eyes. (See Chart 1.) Global output fell by 13% y/y in April, more than double the 6% decline in the month prior. Output in China grew by 0.2% y/y while output outside China plunged by 28.5% y/y. The net effect is that the year-to-date decline in global steel output deepened from -1.1% in March to -4.2% y/y last month. (See Table 1.)
  • As China gears up for an infrastructure splurge, its steel output is likely to rise in the months ahead. As we discussed in an Update earlier today, the fiscal stimulus announced at the National People’s Congress should boost steel demand in China. Rising consumption will increase the rate at which stocks – built up during Q1 – are depleted. Therefore, Chinese steel mills are likely to ramp up output in the coming months.
  • By contrast, even steeper declines in output outside China seem inevitable. Several steel producers in Japan have already announced plans to suspend or shut more blast furnaces in the months ahead. Meanwhile, capacity utilisation rates at steel mills in the US have continued to plummet in May and are now just a touch above 50% according to the American Iron and Steel Institute, compared to the all-time low of 33.5% in December 2008. It’s a similar story in Europe where reports suggest that over a tenth of steelmaking capacity has been shut entirely. And India’s nationwide lockdown was recently extended until the end of May, which will weigh on output there.
  • The upshot is that even if China’s output picks up in the months ahead, it should be more than offset by further falls elsewhere. One consequence is that, once the dust settles on this crisis, China’s already-high share of global steel production will have grown even larger.

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

Sources: World Steel Association, Capital Economics

Table 1: Steel Production

US

India

China

Japan

Europe

World

Apr. 2020 (Mn. Tonnes)

5.0

3.1

85.0

6.6

12.4

137.1

% y/y change

-32.5

-65.2

0.2

-23.5

-24.2

-13.0

Jan. – Apr. 2020 (Mn. Tonnes)

26.7

30.1

318.7

30.7

58.3

580.2

% y/y change

-9.6

-21.1

1.1

-8.6

-10.8

-4.2

Sources: World Steel Association, Capital Economics


Kieran Clancy, Assistant Commodities Economist, +44 20 3974 7422, kieran.clancy@capitaleconomics.com