World steel production slows down on weak demand

The World Steel Association has released the Nov 2011 production numbers, which clearly indicate a bleak picture for steel consumption across the world. The crude steel production for Nov is up by 1% to 116 MT vs. 6% growth in 2010. Year-till-Date, the production has declined by 5% as compared to the 12% growth in 2010. The number of members of the association was 64 in 2011 vs. 66 in 2010. The debt crisis in Europe and a weak US economy has seen a major hit in production due to declining demand in 2011.

China, the largest contributor to global steel production (45% of world production), has seen a slight decline of -0.29% to 49.9 MT for Nov 2011 as compared to the same period last year. The decline in Chinese production is a matter of concern for the steel industry, as the larger part of the growth comes from China. Any further slowdown in production in the coming months will lead to a decline in steel prices, which will impact the companies' sales and profitability in a high input cost scenario.

Among the EU nations, Germany’s crude steel production for Nov 2011 was 3.5 MT, a decrease of  -10.0% against that in Nov 2010. On the other hand, Italy's production grew 12.3% to 2.5 MT and France produced 1.3 MT of crude steel, up by 4.2% in Nov 2011.

Also, according to the World Steel Association, the capacity utilisation has come down to 73%, the lowest point in 2 years as compared to that of 76% in Oct 2011 and 83% in Apr 2011. A continuous decline in capacity utilisation is indicative of lower demand, which has forced the companies to reduce the production levels.

From the production numbers, it is evident that 2011 has been a modest year as compared to 2010.

We, at DSIJ, believe that the demand outlook in the short-to-medium term will remain muted, considering the weakening economic situation all across the globe and domestically too. However, the domestic demand remains strong from the long-term perspective, as development in the infra and construction sector remains one of the major areas of focus for the government in the coming years. This will certainly drive growth.