China drives steel production growth in February
Moneylife Digital Team 29 March 2013

As per World Steel Dynamics, inventory restocking should continue in China on a broader level as 2012 saw a large destocking of inventory which is still getting replenished

The Chinese crude steel production momentum remains strong since October 2012 and has grown in double digits for the last four months, observes Nomura Equity Research in note.

 

China produced 61.8 million tonnes of crude steel in February 2013, up 10.6% year-on-year. These observations are reflected in the higher inventory of steel, as trader inventory in China has now increased to 20.8 million tonnes, from 13.2 million tonnes in December 2012. The trader inventory is now close to the March 2012 level. However, as per World Steel Dynamics, inventory restocking should continue in China on a broader level as 2012 saw a large destocking of inventory which is still getting replenished.

 

Global crude steel production grew by 1.8% year-on-year during February 2012 and 3.4% year-on-year for the first two months of the year. On a seasonally adjusted run rate, production growth was higher, at 7.6% year-on-year. Global capacity utilization at current levels would be about 80%. The production growth has been driven primarily by strong Chinese production (10.6% growth year-on-year to 61.8 million tonnes). However, weak production in the US (down 11.8% year-on-year), European Union (down 3.5% year-on-year) and CIS countries (down 9.7% year-on-year) were key drags on the overall growth.

 

Crude steel production at both the US and EU has been weak during February 2013 with year-on-year declines of 11.8% and 3.5%, respectively. While EU steel production has remained weak for the last 12-15 months, US steel production numbers have started to fall for the last six months. EU production has been impacted primarily by weak production in Italy (it produces 15% of total EU crude steel output), which declined by 15% year-on-year. However weaker steel production in the US is mainly on account of the high base last year (crude steel production growth during July 2011 to May 2012 was about 10% and in February 2012 was 12.8%).

 

As per recent data, steel inventory with traders and service centres has further increased in March 2013 – Chinese trader inventory has increased to 20.8 million tonnes from 12.2mt in Dec-2012, while global inventory has increased to 39.8 million tonnes from 30.3 million tonnes in December 2012.

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