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Global steel output shows recovery - but still fragile

- By Charlotte Stubben

According to a Reuters calculation, the daily rate of global steel production rose slightly in February 2012 from a month earlier.

According to a Reuters calculation based on data released by World Steel Association, the daily rate of global crude steel production rose slightly in February 2012 from a month earlier, helped by a seasonal demand pickup in top producer China.

When the figures take into account the extra day in February 2012 as compared with 2011, however, both Chinese and global daily steel production were down slightly last month compared with February 2011, showing the sector continued to suffer from the uncertain economic situation.

Positive signs
Mr Denny Sabah, an analyst at trading house Ronly, said that "There are definitely positive signs in some parts of the world, namely China and the USA. However, other major countries are still falling short of their potential and are still disappointing on the downside. The steel sector is slowly getting back on its feet; it still though has quite some way to go, and it is as regionally diverse as ever."

Data from the World Steel Association showed that the global steel capacity utilization rate was at 79.7% in February 2012, up by 3.1% MoM from January 2012 but down by 2.8% YoY from February 2011.

Chinese production
An increase in daily Chinese production to 1.9 million tonnes in February 2012 from 1.8 million in January 2012 was largely due to a seasonal demand increase, but analysts warned that production growth in the Asian country would be lower this year.

Ms Melinda Moore, a principal of CleanUP Commodities Research, said that "While Chinese momentum continues to improve into March as seasonal construction returns. China's YoY growth rates in February actually fell slightly, in sharp contrast to the 8% to 10% growth rates we have enjoyed across the past decade."

Read more: Meps: Global steel price falls for fourth constructive month

Steel consultancy MEPS said that double digit growth would be out of question for this year and forecast a 7.5% increase in Chinese apparent consumption, down from about 10% in 2011.

US - a slight pickup
The United States, the world's largest economy, recorded a slight pickup in daily production levels in February 2012 as compared with January 2012, helped by restocking.

Mr Michelle Applebaum, an analyst with Steel Market Intelligence, said that "In the US, we expect to see modestly higher production in March on the back of stronger sheet demand and recently announced sheet price hikes."

Steel production in the EU
Daily steel production in the European Union was also slightly up in February 2012 from the previous month but was still below the rate registered in February 2011.
Analysts said that as the list of European steel plant closures lengthens and demand remains subdued, it is difficult to imagine a strong pickup in this area in the near future.

Read more: Meps predicts an autumn recovery for EU steel prices

The latest blow to confidence was the announcement from the world’s largest steel maker, ArcelorMittal, that it would extend the closure of its electric arc furnace in Schifflange in Luxembourg, indefinitely.

Mr Kaye Ayub, steel and iron ore consultant at MEPS, said that "In Europe the financial crisis is still weighing, and restocking hasn't been as pronounced as in the US. Globally the situation in the steel market is still quite fragile as a lot of the increases seen in the US and some other countries are mainly because of restocking rather than end user demand."

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