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Steel output springs a surprise in May

Global crude steel output in May fell by 2.1% from a year ago and is also down by 1.9% in the first five months of 2015.

That fits with the narrative of gloomy times for steel makers.

But the monthly data released by the World Steel Association also shows a surprising 3.2% surge in output over the preceding month.

This surge comes at a time when iron ore prices have staged an unexpected partial pullback from a free fall, though coking coal prices continue to remain soft. China’s output rose by 1.5% sequentially, despite weak domestic demand for steel. A report on www.steelorbis.com, an online steel news and e-commerce website, said that the first 10 days of June too saw average daily output increase by 2.3% over the last 10 days of May.

It is not just China. Developed markets such as the European Union and North America are at it, and so is the Commonwealth of Independent States.

An increase in China’s output means that its steel exports will upset supply conditions in major consuming markets. With other producers too increasing output, the pressure is only likely to increase. A few big US steel makers have issued profit warnings in the current quarter.

The only silver lining in this scenario is the decline in iron ore and coal prices. But if lower material costs are resulting in an increase in output, then steel prices may continue to be under pressure.

Source: LiveMnt

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