Based on reported US import licenses, long products imports in February declined by 41% compared to January actuals to reach 156,000 short tons, below the November 2008 import low of 173,000 tons. This was driven mainly by the halving of wire rod imports from 84,000 tons in January to 41,000 tons in February, and by a sharp decline in parallel flange sections imports from 83,000 tons in January to 21,000 tons in February (due to lower tonnages from Korea, Taiwan and Germany).
Import licenses reported up to March 17th were 98,000 tons so full-month imports for March are likely to be higher than February’s.
Chinese crude steel production grew 10% between December and January to reach 41.5 million metric tonnes. Exports declined to 1.91 million tonnes in January, a full 40% decrease on December, and apparent domestic consumption was 37.8 million tonnes compared to 33.1 million tonnes in December.
Based on reported import licenses, US flat products imports increased 8% in January to 514,000 short tonnes compared to December actuals of 474,000 tons. Licenses reported up to 17 February reached 347,000 tons, which indicates that full-month imports for February should climb significantly.
I will now be reporting monthly US import license data for flat products, as I do for long products. I report the monthly results about two weeks after the month-end (so January results at mid-February) and also give mid-month results for the current month.
License data comes from the website of the import administration called SIMA, which updates the data every Tuesday. We have found that license data reported two weeks after month-end is an excellent predictor of actual imports, though actual import results which come from the Department of Commerce trail the month end by six weeks.
Ternium announced 2008 financial results today. You can read the company’s press release here. Ternium’s EBITDA per ton in Q4 fell significantly from Q3 but remained near the top of the companies we follow on a regular basis on the Nerds of Steel earnings spreadsheet.
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.
The current economic downturn has wreaked significant havoc on the global economy and on the steel industry. Not surprisingly we are all wondering “How long will this recession last and how bad will it get?” Of course, no one knows. But there are some historical precedents and while history may not provide a clear answer, it may help us bracket the possible outcomes and put the current crisis in context.
Two economists, Carmen Reinhart of the University of Maryland and Kenneth Rogoff of Harvard University, have studied the aftermath of previous financial crises and have measured the depth and duration of their economic impact. Here’s a direct link to the paper, which was presented at the American Economic Association meeting in January 2009.
The economists looked at five variables to measure the recessionary impact of financial crises – the declines in housing prices, equity prices, and real GDP per capita, along with the increases in unemployment and government debt. For four of the five variables the authors also measured the duration of the downturn.
The data presented in the paper paint a bleak picture. Housing prices on average declined for 6 years and fell by a total of 35%. Equity prices fell on average by 56% over a period of 3.4 years. The average decline in real GDP per capita was 9.3% but “only” lasted for 1.9 years. The unemployment rate increased by 7 percentage points over 4.8 years and government debt rose by 86%.
The declines in housing and equity prices in the US are now approaching the averages cited above and we have been in recession for over a year now. This might offer some hope that we are approaching the bottom of the crisis. I certainly hope so. But as the authors point out, the previous financial crises were more regional in nature. This is the first truly global crisis. So while history may provide some guidance we are, just to add to the uncertainty, in uncharted waters.
