Global steel production hit the highest levels on record in March, led by growth in China and India, according to data released by the World Steel Association.
145.0 million tonnes of crude steel were produced in the month, up 4.6% on a year earlier, In cumulative terms, 410.5 million tonnes were produced in the first quarter of 2017, 5.7% above the same period last year.
However you measure it, it’s an unprecedented amount, with the vast majority produced in Asia.
This chart from the Commonwealth Bank shows the breakdown of global steel production by individual nations or economic blocks over the past 15 years.
Global production has rebounded strongly recently after several years of consolidation, thanks largely to China — accounting for 50% of total global production — which rolled out significant infrastructure and residential investment in early 2016 to help address a slowdown in the broader Chinese economy.
Production in India, currently accounting for 9% of total global output, has also been growing strongly, increasing by 9.3% year-on-year in March.
As a nation with vast reserves of the two main ingredients required to produce steel — iron ore and coking coal — it’s provided a windfall for the Australian economy over the past decade and a half.
While there are persistent concerns on whether recent strength can be maintained in the longer-term — particularly with concerns over the outlook for demand for Chinese steel both within and outside of China — over the near to medium term, demand for Australian iron ore and coking coal looks set to remain firm, says Vivek Dhar, mining and energy analyst at the Commonwealth Bank.
“Australia’s exports to China will likely build again this year as Chinese steel output expands to accommodate stronger domestic demand. China’s steel consumption will likely grow 2-3% as policymakers look to backstop growth with infrastructure investment ahead of elections later this year,” he said in a report on Tuesday.
“Australia’s iron ore exports to China will also increase as high-cost domestic production, which accounts for around 15% of China’s iron ore needs, is increasingly being replaced by low-cost imports.”
Already, China accounts for the vast bulk of Australian iron ore exports, scooping up around 80% of total seaborne supply.
And while Dhar sees Chinese demand for Australian iron ore increasing again this year, he believes the main opportunity for Australia from India will come from increased demand for coking coal.
“India’s promising steel production growth offers more opportunities in coking coal than iron ore,” he says. “India has enough local iron ore to help expand domestic steel output, which is growing at a world-leading pace.
“An absence of good-quality coking coal will mean that India will likely become the main consumer of Australian coking coal in coming years.”
India currently accounts for around 20-25% of monthly Australian coking coal exports, says Dhar, around the same levels of demand from China and Japan.