Led by a sharp decline in China, global steel production fell heavily in January.
According to the World Steel Association, a body that captures production levels at 66 nations around the world encompassing 85% of global output, steel production fell to 128 million tonnes in January, representing a decline of 7.1% from the levels of a year earlier.
The chart below, supplied by the group, reveals the recent trend in production levels. For the most part, steel production has contracted in annual terms for well over a year, casting doubt on forecasts offered by some miners that global steel production will not hit its peak until several years ahead.
Production in China, the world’s largest individual producer, fell to 63.2 million tonnes, a decline of 7.8% on the levels of 12 months earlier.
The steep decline, the largest seen in several years, goes some way to explaining the recent rebound in Chinese steel prices, and as a consequence, the iron ore price.
Of the other major steel producers, production fell by 2.8% in Japan, 1.2% in India, 4.5% in South Korea, 8.8% in the US and 10.6% in Russia.
Reflective of enormous overcapacity at present, the global capacity utilisation rate came in at just 66%, some 5.8 percentage points lower than the levels of January 2015.
In the absence of an unexpected rebound in global demand, conditions in the sector look set to remain bleak unless excess steel producing capacity, particularly from China, is removed from global supply.
China’s government has stated that it intends to reform its steel sector in the years ahead. The question many are now asking is how serious the nation is on delivering that promise.
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