Worldsteel just published the preliminary world crude steel production figures for January 2009. They show a small 5% increase in output from December data entirely attributable to China – a trend that seems to have been shortlived according to this article in the FT on February 20. For non FT-subscribers the article says:
Chinese steel mills appear to be cutting production, after a sharp increase since December, reflecting fresh concerns about domestic demand and doubts about whether the Chinese economy has bottomed out.
All other regions of the world were flat with the prior month. There were also a considerable number of significant revisions to the December data, so with that in mind, any inferences to be drawn from this month’s figures should be done so cautiously. Data in the Nerds Crude Steel spreadsheet below.
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I think world crude outpur of 5% in Jan 09 was not demand driven but hope driven and so in Feb and March we are going to actually see decline. Steel industry is not going to get out of woods unless China cuts capacity and production by more than 40% which looks unlikely as of now. The other major worry is that China had built up this capacity as it was growing at 11+% GDP growth in last decade which for next 3 years looks highly unlikely. This is further going to reduce its internal consumption releasing more steel into international market further depressing prices and throwing industry in bigger turmoil. My personal view is that China should permanently dismantle 40% of its capacity of 600 mt and should not allow any capex for next 5 years. Only this will put steel industry on a road to recovery and give long term stability to the industry and environment.