Global crude steel production dips 1.5% in Jan-Aug'24; India still bucks trend among top six

• Output falls sharper 6.5% y-o-y in Aug
  
  
• Japan, Korea battle several challenges
  
  
• China's production cuts seen continuing
  
  

Morning Brief: Global crude steel production fell 1.5% y-o-y to 1,251.1 million tonnes (mnt) over January-August 2024, as per worldsteel data. In August, 2024 alone, production fell a sharper 6.5% y-o-y.

Within the top six producing countries, only India showed an increase in this period while the balance five continued to show a decline, a trend seen since March this year.

South Korea fell the most, by 5.5%, while Turkiye, though not among the top six, continued to record the steepest growth of almost 15%.

Country-wise overview

China continues with production cuts: Crude steel production in China, the world's top producer and consumer of steel, fell 3.30% over January-August, to 691.41 million tonnes (mnt) in 2024 against the -2.20% (613.72 mnt) seen in January-July, 2024. A combination of factors is pulling down output, the foremost of which, of course, is lack of domestic demand, with real estate construction, manufacturing and infrastructure sectors continuing to slow down.

Secondly, China has resumed its focus on decarbonisation goals after some setbacks seen in the post-Covid period. Regional administrations have been issuing production cuts diktats, keeping emissions curbs in mind. Thirdly, anti-dumping investigations against China from regions/countries like the European Union, Vietnam, Turkiye and Malaysia are also impacting exports and in tandem production. Lastly, China's aging population, which typically consumes lesser per capita steel, is increasing, impacting domestic downstream demand.

India retains infra push, but fights on-ground challenges

India continued to buck the trend with production rising 6.5% y-o-y to 98.5 mnt in the first eight months. In August alone, the growth was a more nominal 2.6% y-o-y and provisionally flat m-o-m.

India still remains a bright spot in the global steel firmament with demand expected to show a healthy growth of 8.2% in 2024 compared to a global growth of 1.7%, according to the latest Short-Range Outlook of the World Steel Association. This positivity stems from the fact that the new Budget retained the infrastructure spend target unchanged at INR 11.11 trillion.

Infrastructure investment and healthy growth momentum in automotive are expected to push up steel demand.

Some amount of production cuts happened towards the initial part of the year but which paid off. A major bout of restocking ahead of the elections in April helped to keep the production tempo up.

But, having said that, mills are now under pressure amid rising imports and lean export opportunities. Construction sector demand has also been dull, especially with the advent of the monsoon. These factors pressured mills to opt for production cuts and maintenance downtime. The smaller mills are still maintaining a production drop of 20-25%.

Japan steel demand softens amid several challenges

Japan's domestic crude steel production declined for the sixth consecutive month in August 2024, falling by 3.9% y-o-y to 6.87 mnt compared to the same period last year due to several reasons.

1. Demand for steel remained sluggish due to rising procurement costs and limited construction activities. Construction companies are selectively pursuing projects, leading to a softening trend in the domestic market.

2. Crude steel production was also impacted by weak export demand amid stiff competition from China and a strengthening currency. From almost 158 to the dollar in June this year, the yen has gained to 143 in September.

3. An overall decline in global steel prices is affecting mills' profitability, forcing reduction in production.

4. Lastly, Japan witnessed a slump in automotive production post-safety test scandal at a leading car manufacturer.

Korea struggles amid weak demand, Chinese export surge

Korea's production fell the steepest, by 5.5%, to 42.5 mnt over January-August, 2024. Sluggish domestic demand forced two of the steel majors, POSCO and Hyundai, to undertake facility management at their respective works over April-May. Demand has been weak, impacted by a slumping housing and construction sector. The Chinese exports overdrive has also dented Korean mills' export opportunities. Plus, high interest rates have impacted steel consumption too. Korea's scrap consumption fell nearly 50% in the first half of 2024, proving that demand is dull and warranting production drops.

New industrial policy supports Turkiye's output

Turkiye, meanwhile, staged a strong comeback after ending 2023 with a 4% decline. Production has been increasing on the back of increased domestic demand, fuelled by post-earthquake reconstruction. Plus, production has been supported by increased sales to Europe. Its geographical location makes it an ideal sourcing destination, logistically, for Europe. Plus, the government has been proactively attempting to stabilise the economy with a new industrial policy supporting consumption, and which also encouraged newer capacities to go onstream from the second half of 2023.

Outlook

Production cuts will continue in China amid the existing challenges and fears of a recession. Global demand is likely to stay range-bound across many geographies, although the US is seen holding up. Europe is still battling inflation and high energy prices. India, on the other hand, is expected to see firm demand going forward.