Global steel output may hit record in 2021: analysts

Global steel output may hit a new record in 2021, on a recovery after the pandemic slashed rates outside China last year, according to analysts, including Commerzbank.

Strong steel growth in the first half in China – up 11.8% year on year to 563 million mt – and elsewhere has driven the market’s rebound, after scores of blast furnaces idled a year ago in Europe, Brazil, the US and Japan restarted.

Steel producers accelerated restarts from the second half of 2020, to capture steel demand and record high prices.

“If the pace of steel production does not slow, more than 2 billion mt of steel could be manufactured in one year worldwide for the first time,” Commerzbank analyst Daniel Briesemann said in a July 26 report.

Commerzbank said is “fairly certain that a new record will be achieved,” exceeding 2020’s 1.83 billion mt, and annual high of 1.87 billion mt in 2019, according to World Steel Association data. Other analysts are factoring in a steel rebound, with expectations of over 1.9 billion mt.

However, pig iron output is already slowing down in China, falling 2.7% in June on a year earlier, spelling potential weaker forward demand for iron ore and coking coal in the biggest steel market. Pig iron has not kept pace with crude steel growth in China, spelling a bigger share for ferrous scrap and metallics in driving growth to date.

China’s policy is to keep 2021 crude steel output below record 2020 levels, ordering output cuts and restrictions which may hit the market in the second half. China’s crude steel production will have to decline by 59 million mt, or 11%, year on year to 502 million mt over July-December, according to estimates by S&P Global Platts Analytics.

Excluding China, global first-half steel output rose at a faster 17.9% rate, to 440.6 million mt, from H1 2020, according to calculations using World Steel Association data. Over 1 billion mt of steel was produced globally in six months, up 14.4% on H1 2020, while global first half pig iron output rose 6.8% to 684 million mt.

Worldsteel’s June global steel production data at 5.6 million mt/day, is just short of a record in April, and follows a strong base after China broke through 3 million mt/day high in June 2020, Commerzbank said.

“The slight decline in the last two months is being attributed to the efforts of the Chinese authorities to curb local steel production for environmental reasons,” the report said. “According to the WSA’s data, the year-on-year production growth was driven not by China this time (+1.5%), but by countries outside China (where growth rates of over 40% were recorded in some cases).”

Annual steel growth rates outside China need to factor in that most countries outside China were in lockdown in Q2 2020, while China had exited from a lockdown centered in Wuhan and restrictions in other major cities during March 2020.

China scored a swift recovery to steel and pig iron output growth since Q2 2020, and into the first-half of 2021, while rates are starting to slow down.

Even with China’s pig iron output in June contracting year-on-year, daily output was stable from May. Pig iron rates in Germany and the European Union, Japan and South Korea fell in June from May, on a daily basis, according to worldsteel data.

Brazilian iron ore exports to Europe doubled to 3.6 million mt in June, the highest rate since May 2019, “reflecting an annual gain in the continent’s crude steel output in January-May of almost 16%,” shipbrokers SSY said in a July report.

— Hector Forster