Global steel output rises to record

Fri Jan 21, 2011 6:06pm GMT
* Asia drives steel production growth
* Western economies lag behind Asia
* China share of global production falls
By Silvia Antonioli

LONDON, Jan 21 (Reuters) - Global crude steel production touched a new record in 2010, driven by growth in emerging regions and improving manufacturing in the developed world, although the construction sector remained gloomy.
Global production rose 15 percent to 1.414 billion tonnes in 2010 from 1.327 billion in 2008 and 1.229 billion in 2008, according to data released by the World Steel Association on Friday.
"The production data is better than people could expect in the aftermath of the crisis in 2009," said Anthony de Carvalho, administrator on the steel committee at the Organisation for Economic Co-operation and Development(OECD).
"The economic stimulus programmes (undertaken by governments) indirectly helped the steel industry. But many countries are still below pre-recession levels."
Asia and other developing countries drove the growth and reached record production levels, while output in Western economies lagged behind 2008's levels as growth remained fragile and the construction sector was hit hard, analysts said.
Production in China, the world's largest steel producer, rose 9.3 percent to 626.7 million tonnes on the previous year, but its share of global production fell to 44.3 percent from 46.7 percent in 2009.
Analysts said China's growth was strong but hampered by electricity cuts in the last part of 2010, analysts said.
"China had problems trying to meet environmental requirements," said Peter Fish, managing director at MEPS, a steel information provider.
"But the Chinese could not grow 20 or 30 percent like some other countries, because in 2009, when everyone else took a dip, China didn't."
Chinese steel production is expected to grow but at a slower rate in 2011, closer to 5 percent versus 7-8 percent growth in India, Fisher forecast
As China's economy grows, the authorities are likely to turn to monetary policy to contain inflation, and this could affect steel demand, according to analysts.
"We do think that a tighter monetary policy in China will slow down steel consumption and this will start to kick in in the second half of 2011," said Chris Houden, analyst at CRU.
Japan, the world's second-largest steel producer, enjoyed 25.2 percent growth in 2010 to 109.6 million tonnes versus 2009. Its exports have got a boost from growth in neighbouring economies such as China and Korea, according to De Carvalho.
EU and U.S. steel production grew rapidly but from a lower base. Production in the European Union grew by 24.6 percent to 172.9 million tonnes and in the United States by 38.5 percent to 80.6 million.
These countries are still struggling with overcapacity, analysts said.
"(Capacity) utilization is picking up from low levels, but the question is: Will producers keep production low to get price increases?" said UBS analyst Andrew Snowdowne.
While steel production in emerging economies will continue to grow to record levels, it may take developed countries a few more years to go back to pre-crisis levels given the fragile state of their economies, analysts said.
(Reporting by Silvia Antonioli; editing by Jane Baird, reuters.com@reuters.net))