Chinese steelmakers stem the decline in global steel production

The latest data from Worldsteel shows that the decline in global crude steel production seen throughout 2022 reversed in September. Steelmakers produced a total of 151.7 million tons this month, up 3.7% from last September. This is the first annual increase recorded since August 2021.

China
The global recovery was fueled by a modest recovery in China, which produced 87 million tons of steel in September. This means an 18% increase in production compared to last year. However, the percentage increase was due to a low base level twelve months ago, and not due to any significant increase in September this year.

In the second half of 2021, Chinese factories faced pressure from central authorities to cut production to meet energy targets, resulting in several months of low production. When comparing September 2022 data to the previous month's data, growth is a more modest 3.7%.

In the coming months, the Chinese steel industry will face serious challenges. Data from the National Bureau of Statistics shows that only one in five steelmakers currently expects to make a profit in the second half of the year.

In addition, the Chinese real estate market is in turmoil following Evergrande's announcement that it is unable to meet the $300 billion debt it has on its books. Subsequently, it is claimed that three out of ten Chinese real estate companies are on the verge of bankruptcy. The domestic auto industry, although showing signs of improvement in recent months, has yet to fully recover from the supply cuts caused by the Covid lockdowns.

Despite stimulus packages announced earlier this year, China's economy is slowing. With almost 95% of the material produced in China sold to local buyers, the problems faced by the economy as a whole will be acutely felt by steelmakers.

European Union
Demand for steel products in many other regions, especially in Europe, has been weak following panic buying there at the beginning of the year following the start of the war in Ukraine.

Steel companies in Europe have decided to cut supply in an attempt to support prices as rising energy prices hurt their profits. Crude steel production in Germany fell to 2.84 million tonnes in September, down 15.4% year-on-year. Production in Italy also fell 18.7% to 1.87 million tonnes.
Production in the rest of the European Union also fell by a comparable amount. The total block production was 16.7% lower than at the same time last year, at 10.7 million tonnes.

Despite lobbying from energy-intensive industries, European authorities have yet to agree on a rescue package, leaving national governments to take the lead in this area. This comes with an acceleration of various hydrogen and direct reduction projects in the region as steelmakers seek to decarbonize the industry.

Other Europe
European steelmakers outside the EU fared slightly worse. Their combined September production was 3.4 million tonnes, with Turkey alone accounting for almost 80% of that total, down 18.6% from the previous year.

The United Kingdom plans to produce less than 7 million tons in 2022. This will be the lowest annual production since World War II. Rising energy prices mean that the cost of producing a tonne of steel has doubled over the past 24 months, and despite government intervention to curb price increases, energy costs will rise even more.

Ukraine and Russia
Estimates by the National Steel Producers Association of Ukraine show that producers in the country are currently operating at an average capacity utilization rate close to 15% of pre-war levels. Their September crude steel output was 360,000 tons. The country is also experiencing serious logistical problems due to the loss of control over its seaports, through which most of its exports were transported. In the eight months to August, steel production in Ukraine fell to 5.2 million tons, while in 2021 it was almost 13 million tons for the corresponding period.

Despite the imposition of sanctions on Russia by many Western countries, the decline in crude steel production in Russia was less severe than originally predicted. Government assistance to domestic construction projects, as well as the reorientation of exports to Asian markets, have boosted demand for local factories. Wor