Steel production in China is rising, while elsewhere declining

The World Steel Association (WSA) estimates that, despite stabilisation at the largest producer China, world steel production in April fell by 13% year-on-year to 137.1 million tonnes, the sharpest fall since the peak of the economic crisis in 2008/09 in April 2009. according to the WSA, EU steel mills reduced their production in April by 23% year-on-year, the US by a third and India by almost two thirds, while Chinese production was stable. The divergence between China and the rest of the world continued in May. While corona-related restrictions outside China are only gradually being eased, steel production in China continues to rise. According to SMM, companies belonging to the Chinese Iron Ore and Steel Association (CISA) have already produced 2.08 million tons of steel per day in the period from May 11 to 20. This is the second-highest figure for a ten-day period ever and represents an increase of 1.9% over the previous year.

Thus, the concern of the Japanese association regarding the fact that the current strong expansion of production in China will result in higher exports, especially in view of the restrained production elsewhere, is quite understandable. Japan ended the country's state of emergency yesterday, one week earlier than expected. However, subdued demand and longer start-up times are likely to slow down steel production in the country. The Chinese government is pushing ahead with its economic stimulus package. Local governments there are expected to issue bonds worth 3.75 trillion Yuan or over 525 billion USD this year to finance infrastructure programs. This should boost growth in infrastructure investment and demand for metals and steel. Fixed capital formation excluding rural households was particularly weak in the first four months, with a double-digit year-on-year decline.

Source: Commerzbank Research, Photo: Fotolia