Back to top

Analyst Blog

Zacks Equity Research

U.S., China Drive up Steel Output in July

AKS MT X NUE

 ZacksTrade Now

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Global crude steel production trudged higher in July as gains in the U.S. and China capped lower volumes across some of the key global markets, according to a World Steel Association (“WSA”) report. The international trade body for the iron and steel industry said that crude steel output for 64 reporting nations moved up 2.7% year over year in July to touch 132 million tons (Mt). This compares favorably with a 1.9% rise in June.

The growth in July mostly came on the heels of higher output in China which produced 65.5 Mt of crude steel. By region, steel output fell in the European Union, Other Europe, C.I.S. and Oceania while rising in Asia, North America, South America, Africa and Middle East.

Growth was seen across major Asian producers barring South Korea. China, the largest steel producing nation, racked up an increase of 6.2% in output in the reported month. Japan, the second largest producer, recorded a 0.5% increase to 9.3 Mt. Production rose 4.3% to 6.7 Mt in India while falling 5.8% to 5.6 Mt in South Korea.   

In North America, crude steel production rose 3.3% to 7.6 Mt in the U.S., the third-largest steel producer. However, output in Canada and Mexico slipped 18% and 3.4%, respectively, to 0.9 Mt and 1.4 Mt, respectively.  

Europe remains the weakest link as a persistently challenging economic backdrop continues to lead to a flimsy demand environment in the region. In the Europe Union, output from Germany fell 5.4% to 3.4 Mt. Production dropped 9% in France and 8.5% in Italy to roughly 1.3 Mt and 2.2 Mt, respectively. Spain saw a 3.4% fall in output. However, production moved up 1.8% to 0.9 Mt in the U.K. Overall output dipped 6% in the European Union to 13.4 Mt. In the Other Europe region, Turkey logged a 10.1% fall in production to 2.8 Mt.

Among other notable producers, output nudged down 1.4% and 2.4% in Brazil and Russia, respectively, to roughly 3 Mt and 5.7 Mt, respectively. Ukraine had an 8.8% increase to 2.8 Mt. Iran’s output went up 16.1% to 1.3 Mt.

The WSA noted that crude steel capacity utilization ratio for the reporting countries fell to 76.8% in July from 79.2% in June. The ratio also declined 0.8% year over year.

The global slowdown has taken its toll on the steel industry. Steel prices have been hobbled by weak demand, glut of cheaper imports and overcapacity in the industry. Furthermore, the festering Eurozone crisis and its impact on the global economy remain as overhang on the industry. However, there has been an uptick in steel prices of late across the U.S. and China, supporting a rise in production volumes.

Last year, a sluggish construction market, oversupply in the industry, sticky situation in Europe and slowing growth in emerging economies weighed on the performance of steelmakers, including ArcelorMittal (MT - Analyst Report), U.S. Steel (X - Analyst Report), Nucor (NUE - Analyst Report) and AK Steel (AKS - Analyst Report). Decline in steel prices dented margins and profits of these steel players.

According to the WSA, world crude steel production clocked 1,548 Mt in 2012. China alone accounted for roughly 46% of the output with Japan and the U.S. representing roughly 7% and 6%, respectively.  

The WSA envisions global steel usage to rise 2.9% this year, an improvement from a 1.2% increase in 2012. The optimism reflects a recovery in demand in the back half of 2013 driven by emerging economies. The outlook looks even brighter for 2014 as the industry body anticipates steel usage to go up 3.2% factoring in higher contributions from developed economies.

Strength in the auto sector and a turnaround in the so-far beleaguered construction markets are expected to aid to growth in the U.S. Moreover, efforts of the Chinese government in the form of structural economic reforms are expected to curb overcapacity in the industry and contribute to the country’s steel demand. Steel prices are expected to move north in tandem with improved demand across most regions.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%