Global steel production continues to decline in March

The first quarter of 2022 has been a difficult one for global steel production. Production was 456.6 million tonnes, down 6.8% from the same period in 2021, according to the latest figures from the World Steel Association.

The two most important factors behind this decline were a new surge in Covid-19 cases in China - the world's largest steel producer by volume - and the conflict between Russia and Ukraine, the two main steel exporters to Europe.

Since the beginning of March, China has faced a new wave of Covid infections. Tangshan, China's largest steel-producing city, imposed a strict lockdown in the second half of the month, sapping both supply and demand. Since then, control measures have been extended to many other cities. Movement restrictions were reported in several provinces.

This contributed to the biggest drop in shipments for any of the largest steel-producing countries in the first quarter of 2022. Compared to the previous year, the volume of production decreased by more than 10%, to 243.4 million tons. With the peak of infections well above the levels China has seen in previous waves, and with the Chinese government pursuing a COVID-19 prevention strategy, MEPS expects this trend to continue in the short term.

Steel production in Ukraine has declined since the beginning of the invasion of Russian troops. This collapse caused steel production in the former Soviet republics to fall by almost 20% year-on-year in March. In contrast, Russian steel production remained relatively unchanged at an estimated 6.6 million tonnes.

Manufacturing in the European Union also suffered. Steel production in March was 12.8 million tonnes, down 8.5% from the same month a year earlier. Steel associations in Germany and Italy, whose members account for more than 40% of steel production in the EU, specifically cited the effects of the war in Ukraine and the resulting rise in energy prices as reasons for the decline. Production in other European countries outside the bloc fell to 4.2 million tonnes, a 3.5% year-on-year decline.

Steel production in India remains stable. In March, the country produced 10.9 million tons of crude steel, the highest monthly figure ever. Growth is expected to continue in the long term as the country works towards its ambitious target of 300 million tonnes of annual capacity expansion by the end of the decade.

Supply chain problems in the manufacturing industries continue to create difficulties for Japanese steelmakers. The fall in automotive production amid shortages of semiconductors and other components led to a decrease in demand. The industry has responded by cutting production to 23 million tonnes in the first quarter of 2022. The Ministry of Economy, Trade and Industry of Japan predicts that this effect will be reflected in the period from April to June, leading to a forecast that the semi-annual smelting will initially decrease by 3.4% year on year to 46.4 million tons.

U.S. steel production in the first quarter was virtually unchanged from the same period in 2021, at 20.3 million tonnes. Preliminary data from the Census Bureau show that 8.5 million tons of steel were imported into the country during this period, with three countries, Canada, Mexico and Brazil, accounting for half of that amount. The Biden administration hopes to support domestic steel production by including a "Buy American" mandate for federally funded infrastructure projects.

Source: MEPS International Ltd.