US long products import licenses declined 19% to 172,000 short tons in November compared to October actuals of 211,000 tons. License volumes declined for all products except Parallel Flange Shapes and All Other Structural Sections. High December licenses recorded up to the 16th of the month for Parallel Flange Shapes (21,000 tons) due to applications from Russia imply that December imports for these products will rise to levels reached in May 2008 (45,000 tons).
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Crude steel production in China dropped 9% between September and October, falling to 35.9 million metric tonnes. However, finished steel production increased 19% in October to 42.9 million tonnes from 36.0 million tonnes in September. This is the highest Chinese monthly finished production level ever recorded, bringing it above the peak June 2008 level of 42.8 million tonnes. Net exports dropped 36% to 3.48 million tonnes.
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In response to a presentation I posted recently on this blog, I received the following questions from an investment firm based in Switzerland.
2) Europe is expected to grow below 2,5% real GDP for the next decade. So your correlation would indicate falling steel demand for the next years, even beyond the current recession. Is that realistic?
3) What sources could you recommend for historical data and forecasts on prices and demand?
I’ll take a stab at addressing each of the questions but would like to encourage our readers, especially those with expertise on Europe, to contribute as well via comments on this post.
The correlation between GDP and steel demand does appear to be applicable to Europe, which means GDP growth projections have some explanatory power when thinking about future steel demand. As can be seen in the graph below, steel demand among the EU 12 grows when GDP in the region grows by more than 2%, and falls when GDP growth is under 2%.
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According to newly released data by the World Steel Association, global crude steel production slowed by about 7% from September to October. Steel output is higher in 2008 than in 2007 by about 2.9%.
But the more interesting analysis is to explore how the data reflects the global industrial slowdown in different parts of the world economy. Global crude steel monthly output in 2008 peaked in May. Since then, monthly production has fallen about 20MT or 16%. But the decline has not been shared equally.
Russia and Ukraine represent about 6% of total crude steel production, but their decline (very export and semi-finished intensive) has been 37% or 19% of the total decline. China’s monthly crude steel output has declined 22% since May or 52% of the global decline. China represents about 36% of global crude steel production.
And the developed world’s (North America, Europe, Japan etc) monthly output has declined 10% since May or 25% of the total decline. But even here there is significant variation. The US and Canada have declined 16% while the EU-27 declined only 10%. Despite these variations, or may be because of them, it looks like the global steel production system is respondingly quickly and appropriately to the rapid shift in demand expectations. All the data for this analysis is contained in our spreadsheet below. Feel free to share your own insights in a comment.
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US long products imports licenses grew marginally to 241,000 short tons in October from 233,000 tons of actual imports in September. As predicted in an earlier post, rebar licenses declined (to 37,000 tons from 58,000 September actuals) and wire rod licenses increased (to 143,000 tons from 97,000 September actuals). China accounted for a big portion of the increase in wire rod licenses with license applications going from 14,000 tons in August to 8,000 tons in September to 58,000 tons in October.
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