By Clyde Russell
LAUNCESTON, Australia- China’s steel output fell in November from October, seemingly another sign of the struggles in the world’s biggest producer of the key metal for construction and manufacturing.
But while November production did drop 4.3 percent from October, the detail is far more nuanced and the big picture shows China’s steel sector is largely steady, as it has been for the past five years.
Crude steel output in the world’s largest producer was 78.4 million metric tons in November, down from 81.88 million in October, data from the National Bureau of Statistics showed on Monday.
However, on a tons per day basis, November was 2.61 million tons, down only 1.1 percent from October’s 2.64 million and higher than the 2.54 million from November 2023.
It’s likely that output eased in October as steel mills saw margins squeezed by higher iron ore prices and softer prices for key steel products such as rebar.
Steel production also tends to moderate as the northern winter approaches, partly as demand eases with colder weather cutting construction, but also steel mills tend to undergo maintenance and face pollution control measures in some areas.
For the first 11 months of the year, China’s steel output was 929.19 million tons, down 2.7 percent from the same period last year.
However, it’s likely that December’s production will come in higher than December 2023, which at 67.44 million tons was the weakest in six years.
This means that 2024 output is likely to be around 1 billion tons, roughly in line with the 1.02 billion tons produced in 2023.
However, given 2024 production is likely to be slightly down from 2023’s figure, the media headlines will probably be downbeat when the final data is released early next year.
This isn’t an accurate picture. In volume terms, China’s steel output has been largely stable since 2019.
Production hit 996 million tons in 2019, before rising to a record 1.07 billion tons in 2020 and then easing to 1.03 billion in 2021 and 1.01 billion in 2022.
In other words, since 2019 the gap between the weakest year and the strongest for steel output was a mere 74 million tons, and in recent years the gap has been even smaller.
Essentially China’s steel production has flatlined, and while this isn’t a bullish story, it’s far from the bearish narrative that is the current market consensus.
What has shifted slightly is that China is exporting more steel products, with 101.15 million tons being shipped out in the first 11 months of 2024, a gain of 22.6 percent from the same period last year.
Assuming December steel product exports are largely in line with November, that means total exports for the year are likely to be around 110 million tons. – Reuters
