Global and more importantly, Chinese steel production continues to run at near record pace.

That's good news with iron ore producers and steel groups about to start talks for September quarterly iron ore prices.

The industry is confidence there won't be a repeat of the 35% drop in prices in 2010 in the middle quarters of the year.

Indian sport prices in China were running around $US183 a tonne, while the major indexes run by companies like Platts, were all grouped around $US175 to $US177 a tonne last Thursday: they are at six week's low.

Local producers are confident there won't be too great a fall: in fact Rio Tinto's Global head, Sam Walsh, was confident of third quarter prices being 1% different than the current quarter's levels.

That's good news for the likes of BHP and Billiton, but the market has gone off the sector in recent weeks (as the latest Bank of America Merrill Lynch survey showed on Friday)

Figures out on Friday from the World Steel Association revealed that crude steel output in April was 126.9 million tonnes, down from the record 129.75 million in March, but 5% above the level in April of last year.

As previously reported Chinese production was just over 59 million tonnes in March, or a daily rate of more than 1.9 million tonnes.

In fact Chinese mills have been producing at a higher level in 2011 than they did in 2010: the 1.9 million tonnes a day, compared with around 1.7 million over all of last year.

China appears to be headed for another record month in May after the China Iron & Steel Association estimated that average daily production in the first 10 days of the month rose 0.3% versus the last 10 days in April.

That's despite some public moaning and groaning by the industry (through the China Iron and Steel Association), and through companies, such as the giant Baosteel which had a very public whinge late last week about high priced iron ore.

This year's higher output is being achieved despite the cuts in government stimulus spending, four interest rate rises since last October, 8 increases in bank asset reserve ratios, and national and local government restrictions on property deals and investment.

And analysts in China doubt that production will be impacted by the widening drought which is starting to cause power cuts, along with high oil and coal prices.

So going by the average daily output in April production is running at an annual rate of 718 million tonnes, 15% higher than last year's total production.

That was more than twice the 6% annual increase forecast for 2011.

China's crude steel production for April 2011 was 59.0 million tonnes, 7.1% compared to April 2010.

The power restrictions in China may have also impacted output as steel producers sought to produce as much product before reducing output in coming months.

But many analysts doubt that will impact the industry.

Japan posted a 6.3% production drop in April to 8.4 million tonnes.

The World Steel Association said on Friday the drop was likely due to the impact of the March 11 quake and tsunami which caused a 15.3% drop in industrial production in March and continues to disrupt the car industry, which is a key steel consumer.

In contrast, South Korean production jumped 15.9% from April, 2010, to 5.9 million tonnes.

In the EU, Germany's crude steel production for April 2011 was 3.8 million tonnes, down 1.7%; Italy's crude steel production was 2.5 million tonnes, up 9.8% compared to the same month last year. Spain produced 1.5 million of crude steel in April 2011, down -5.8% over April 2010.

Turkey's crude steel production for April 2011 was 2.8 million tonnes, up 14.3% compared to April 2010.

The US produced 7.1 million tonnes of crude steel in April 2011, 2.1% higher than in April 2010.

In April 2011, the world crude steel capacity utilisation ratio of the 64 countries was 82.8%, 0.9 percentage points higher than in March 2011. Compared to April 2010, the utilisation ratio remained unchanged (See the above graph).

Australian crude steel production was estimated at 650,000 tonnes up April, up 15% from April of last year.

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