World steel production declined in July despite record production in China

World crude steel production declined in July as production growth in China to a new record level was more than offset by a decline in other major producers. Disruptions related to the coronavirus pandemic continued to damage production in several steel producing regions.

Crude steel production in 64 reporting countries fell 2.5% year on year to 152.7 million tonnes in July, according to the latest report from the World Steel Association (WSA). The WSA noted that due to the difficulties associated with the pandemic, many of the July figures are estimates that could be revised with a production update next month.

China produces record steel production

Steel production in China, the world’s largest steel producer, surged to a record high in July on strong domestic demand supported by government investment in infrastructure.

According to the WSA, production in China, which currently accounts for more than 60% of global steel production, rose 9.1% year on year to 93.4 million tonnes in July. In the first seven months of 2020, production grew 2.8% year on year to approximately 593.2 million tonnes.

China, which emerged from isolation earlier than other countries, is gradually recovering from the effects of the pandemic. Steel production in China fell in March as the country’s steel mills cut production due to a slowdown in domestic demand and an increase in finished steel inventories. Production began to recover in April amid renewed idle capacity and higher utilization.

What difficulties did other major manufacturers face in July?

Among other major Asian producers in India, July production fell 24.6% to 7.2 million tonnes, the fifth straight month of decline. Disruptions from the coronavirus crisis are damaging domestic steel demand.

Production in Japan also fell 27.9% to 6 million tonnes in the month under review. Steelworkers in the country faced weak demand from the manufacturing sector amid the viral crisis. Steel production in South Korea also fell 8.3% to 5.5 million tonnes. Consolidated production in Asia rose 2.3% to 116.5 million tonnes.

In North America, steel production fell 29.4% to 5.2 million tonnes in the US in July.

The coronavirus has severely damaged the US steel industry. The pandemic has reduced demand for steel in key end-use markets such as construction and automotive. Low demand has forced domestic steel mills to cut production, and capacity utilization has dropped to a multi-year low this year. US steel prices have also come under pressure this year amid sluggish demand.

Meanwhile, in July, smelting in Canada fell by 24.5% to about 0.8 million tons, and in Mexico – by 22.6% to about 1.2 million tons in July. Total volume in North America fell 28% to about 7.2 million tonnes.

In the European Union (EU), production in Germany, the region’s largest producer, fell 24.7% to 2.4 million tonnes. Production in Italy fell 11.2% to around 1.8 million tonnes. France also saw a 34.5% decline to 0.9 million tons, while production fell 31.6% in Spain to about 0.6 million tons. Total production in the EU fell 24.4% to 9.8 million tonnes.

Low demand in the automotive and construction industries is hurting steelmakers in Europe. Lower demand forced steelmakers in Europe to scale back their capacity to adapt to the difficult situation.

WSA expects EU steel demand to decline 15.8% this year. The manufacturing sector in the EU was expected to recover in 2020 from the 2019 recession. However, it found itself in a deeper recession due to restrictions that led to a significant decrease in orders. The trade organization expects the auto sector in the region to be hit hardest.

In addition, in July, steel production in the Middle East fell 0.8% to 3.2 million tonnes. Iran, the largest producer in the region, posted an increase of 14.4% to about 2.3 million tonnes. In Africa, in July, the figure fell by 12% to 0.9 million tons.

Among other well-known producers, production in Turkey rose 7.4% to 3.1 million tonnes. Production in Brazil, the largest producer in South America, rose 3.5% to about 2.6 million tonnes.

What lies ahead?

Going forward, steel production in China is likely to continue to grow amid recovery in domestic demand and economic activity. The recovery in construction and manufacturing is driving demand for steel in China, the world’s largest consumer of steel.

Steel mills in China are likely to continue to ramp up production amid optimism that government stimulus measures will boost domestic production.

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