Global crude steel production showed a 7% y-o-y decline in June with the de-synchronisation between China and the rest of the world widening. In June, Chinese crude steel production rose 4.5% y-o-y while the world ex-China posted a 21% y-o-y drop. For the first half of 2020, respective changes were +1.4% and -14.3% with a total output of 873Mt, a 6% y-o-y drop. The largest declines came from the EU (-18.7% y-o-y), the USA (-18.3% y-o-y), Latin America (-19.9% y-o-y), India (-24.2%) and South Africa (-49.4% y-o-y). The dichotomy between China and the rest of the world reflects the COVID-19 impact, with China starting to recover in Q2 while most other countries were still locked down.
The de-synchronisation between China and the rest of the world was also a feature of the global financial crisis (GFC) in 2008-09 as the Chinese government launched massive infrastructure spending to stimulate the economy. However, the flip side was a build-up of significant debts and, in 2020, the Chinese authorities have been more cautious, taking care not to put the country’s recent restructuring efforts at risk. Nevertheless, infrastructure and construction, which takes about 55% of steel demand in China, supported steel demand in H1, primarily long products and rebar.
Although construction traditionally peaks in Q2, steel demand should remain strong in H2, with non-infrastructure steel demand, such as the automotive sector and machinery, picking up. As a result, Roskill believes that crude steel production in China will most likely break the 1Bnt mark in 2020, exceeding the 2019 previous all-time high of 996Mt. Roskill also expects that some recovery will take place in the world ex-China over H2, the magnitude of which depends on the pandemic and the subsequent governments’ responses.
Crude steel production is forecast to drop slightly below 1,800Mt in 2020 versus 1,871Mt in 2019, with the drop softened by China. In 2021, global steel production should exceed its 2019 level, again driven by China, while the rest of the world will still post a lower output compared to 2019. Long-term production forecasts are, as of yet, still expected to remain largely unaffected. Roskill expects China’s steel output to peak by the middle of next decade before plateauing, while the rest of the world will see production moderately increasing, driven by a small group of countries, primarily India, Vietnam, Iran and Indonesia.