Buyer Community> Trade Intelligence> Metals & Mining> UPDATE 2-Global steel output creeps up in May, down on year
Source: Reuters

UPDATE 2-Global steel output creeps up in May, down on year

Published: 19 Jun 2009 03:32:15 PST

* Steel output edges up in May vs April

* China output ticks up, Europe, U.S., Middle East falls

* Analysts see destocking nearing end

LONDON, June 19 - Global crude steel production edged up in May from April largely thanks to output from China and India, although elsewhere it fell and stayed sharply down from last year, industry data showed on Friday.

World production in May fell 21 percent on a yearly basis, despite rising from April and analysts said monthly gains could continue as inventories were close to depletion.

Crude steel output in May was 95.6 million tonnes, down from 121 million tonnes of May 2008, but up compared with 89 million tonnes in April, according to the World Steel Association.

"We're expecting output to increase now steadily towards the end of the year on the basis that the inventory drawdown is almost complete now," said Peter Fish, managing director of industry consultants MEPS International.

Global steel production has tumbled this year, as demand in key steel consuming sectors such as construction and automotive shrank, forcing steelmakers to sharply reduce capacity usage and causing inventories to balloon.

But over the past month, prices in both long and flat steel products remained steady and even gained ground in certain regions, encouraging mills to boost some production from the current low capacity usage levels.

"We're a little bit of improvement in prices and people will be wanting to buy until prices increase further. There will be a little impetus for mills to get orders," he said.

Earlier this week, U.S. steelmaker Nucor said it expected narrower second-quarter loss thanks to improved order entries in the recent weeks.

"We believe that destocking has largely run its course, and that service centers are beginning to increase their order activity," analysts at Dahlman Rose & Co. said in a research note, adding they expect the capacity utilisation to rise up to 60 percent in the second half.

CHINA TICKS UP

But for the first five months of the year output remained 22.4 percent lower at 449.2 million tonnes compared with the same period last year, said the association, which represents around 85 percent of the world's total steel producers.

But production in China posted a 0.4 percent rise to 217 million tonnes in the first five months. It is the biggest consumer and producer of the metal, accounting for nearly half of world production.

Output in Europe and North America remained low, with the former's production falling 44.4 percent in the January-May period and the latter's down 49.3 percent.

Production in the Middle East, where demand was buoyant last year due to booming infrastructure spending, edged down 0.3 percent in May and was down 0.6 percent in the first five months of the year.

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