Steel: Global Output Up, But Will Europe Crunch The Rebound?

Despite Europe's woes, world steel production has recovered and hit an all time monthly high in March of 132.2 million tonnes.

Figures from the World Steel Association confirm the rebound that has seen Chinese output also surprise with a bigger than forecast improvement in March from the impact of the timing of the Lunar New Year in January and February.

March's output in the 62 countries reporting to the World Steel Association was an increase of 1.8% from March 2011 and a 10% jump from the 120.1 million tonnes produced in February which was impacted by the New Year holiday in China.

The 132.2 million tonnes was the highest so far recorded for any month, and came as capacity utilisation also rose last month 81.1%, the highest it has been for nine months and another sign of the tentative recovery in demand for steel products.

March's production is up 14% from the year low of 115.4 million tonnes hit last November as output in Europe and China slowed sharply.

World Steel said first quarter output at 377 Million tonnes (Mt) was 1.1% higher than the first quarter of 2011.

More importantly it was 20 Mt, or 5.6% higher than the 356 Mt produced in the December quarter of last year, when global steel output dipped to a year low as Europe and China slowed.

In the first three months of 2012, Asia produced 241.7 Mt of crude steel, an increase of 1.5% over the first quarter of 2011.

Reflecting the recession and weak demand, especially in southern eurozone economies, the EU produced 43.9 Mt of crude steel in the first quarter of this year, down 3.9% from the same quarter of 2011.

North American crude steel production in the first three months of 2012 jumped nearly 7% to 31.2 Mt, another sign of the emerging recovery in the country's economy and driven by the rebound in car sales this year.

China's crude steel production for March 2012 was 61.6 Mt, an increase of 3.9% compared to March 2011.

First quarter production in 2012 rose 2.5% to just over 174 Mt from the same period in 2011.

China's March output is up 11 Mt from last November's year low of 49.88 Mt.

That's a jump of 23%, a significant rebound.

Elsewhere in Asia, Japan produced 9.3 Mt of crude steel in March 2012, up 2.3% compared to the same month last year when it was hit by the impact of the March 11 quake and tsunami, then the nuclear crisis at the Fukushima power stations that still impacts Japanese power output.

Hit by the continuing impact of the March disasters, Japan's crude steel output in fiscal 2011 was at the third lowest level in the past decade.

Japan's Iron and Steel Federation says production in fiscal 2011, which ended on March 31, was 106 Mt, a fall of nearly 4% from 2010.

Production in the March quarter was also down 4% from March 2011 at 26.56 Mt, from 27.70 Mt.

The March 11th earthquake and tsunami caused demand for cars and home appliances to drop.

Declining exports due to the record high value of the yen and flooding in Thailand later in the year were added problems that didn't help either.

The federation says the business environment remains difficult and production in fiscal 2012 may not reach the 2011 level.

That's a view shared by JFE, the world's No. 5 steelmaker which this week reported a loss for the 2011 year (ending March 31) and trimmed its forecasts for the coming year.

South Korea's crude steel production for March 2012 was 6 Mt, an increase of 3.2% compared to March 2011.

Posco, South Korea's biggest steelmaker (and the world's Number 3), cut its full year sales target by 12% because of the sluggishness in some export markets.

Posco ships 70% of its steel into the solid South Korean market which has just reported first quarter growth of 2.8% from the same quarter of 2011.

That was down on the 3.6% growth seen for all of 2011 and the 6.3% surge in 2010.

But it was the strongest quarter-on-quarter growth seen for a year.

South Korea's first quarter steel production was up 4% at 17.23 Mt from 16.5 Mt in the first quarter of 2011.

In the EU, Germany produced 3.9 Mt of crude steel in March 2012, down -3.1% on March 2011.

Italy's crude steel production for March 2012 was 2.7 Mt, up by 4.5% on March 2011.

In March 2012, France produced 1.5 Mt of crude steel, an increase of 3.8% compared to March 2011.

Spain's crude steel production for March 2012 was 1.3 Mt, down a massive 19.5% compared to the same month in 2011.

But Turkey's crude steel production for March 2012 jumped 14.5% to 3.1 Mt, as the economy's boom continues.

The US produced 7.8 Mt of crude steel in March 2012, up by 5.4% on March 2011.

Brazil's crude steel production for March 2012 was 3.1 Mt, 2.2% higher than March 2011.

But with the eurozone in recession and the UK now in a double dip, there's every chance the rebound in steel demand and production will fizzle out in coming months, especially if the May 6 poll in France sees the Socialist candidate Francois Hollande win with his high tax, anti-austerity platform.

Elections are due in Greece the same day and then in the Netherlands in June and they could also see confidence and demand hit by strong votes against the austerity measures and in favour of short term spending fixes that will boost demand, but run out of steam.

In Australia the impact of the rationalisation at Bluescope at its Port Kembla plant was seen in the 29% fall in quarterly output to 1.335 Mt from 1.876 Mt in the first quarter of 2011.

But the monthly figures this year show a slightly different story with production in March 29% above the level in January: 490,000 tonnes against 380,000 tonnes.

March's 490,000 tonnes was in fact the highest monthly production in Australia for six months.

But Bluescope shares have hardly moved, closing around 40c yesterday, and about where they were at the start of the year.

But OneSteel shares have starred, jumping 90% to $1.325 yesterday after starting the year at 70c.

While world iron ore prices have recovered (OneSteel exports around 6 Mt a year to China) and the Chinese economy seems to have escaped a hard landing (hence some of the rise in the OneSteel share price), that doesn't explain the considerable outperformance between the two companies.