Commodities | Oct 27 2009
By Chris Shaw
The slower global economy in 2009 will impact on global steel production, with industry analyst MEPS forecasting global output this year of 1,200 million tonnes, a reduction of 9.5% from 2008 levels though a result above market estimates made earlier in the year.
In terms of production details the researcher expects worldwide blast furnace iron making to be down around 5% in year-on-year terms, while direct iron output is forecast to be down by around 8% on the same basis.
As MEPS notes, these numbers suggest scrap based electric melting will be the biggest loser in terms of steel supply sources for the year. This reflects large cuts in supply among EU and NAFTA producers, which have more than outweighed production increases in India and China in particular and Asia in general, with annual production in the region likely to be as much as 40 million tonnes higher.
Output in industrialised nations has been affected by the economic downturn, MEPS noting there have been production cuts of more than 30% forced upon most mills in the EU, North America and Australasia. The severity of the downturn is clear when even the low cost producers such as those in the Combined Independent States (CIS) and South America have also been forced to cut supply by around 20%.
The economic conditions also mean direct reduced iron production will be down, the first time this has occured since 2001. But there are signs of improvement in the researchers’ view, as the revised forecasts call for steel manufacturing activity to pick up significantly in the EU in the final few months of this year as capacity comes back on stream. MEPS is forecasting plant utilisation to rise from 57% in the September quarter to near 67% in the December quarter.
Despite this it expects output in the EU for 2009 will be down more than 30% from last year, while non EU European production should register a decrease of around 8% in total production this year. Production in the CIS is forecast to decline by 17.4% this year, reflecting weak demand from the construction sector.
On MEPS’s numbers South American output will fall by around 20%, while African production should decline by a little more than 11%. In contrast the Middle East should record higher output of around 17.5 million tonnes, up 5%, while the researchers expect 16 million tonnes of additional output from Asia as a whole. This will be on the back of higher production in both China and India, offsetting weaker output in Japan, Korea and Taiwain.
