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World Steel July Output Skids Despite Record China Production
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Global crude steel production retreated in July as a surge in production from China to a new record high was more than offset by declines across other major producers. Disruptions associated with the coronavirus pandemic continued hurt output across several steel-producing regions.
Per the latest World Steel Association (“WSA”) report, crude steel production for 64 reporting nations slipped 2.5% year over year to 152.7 million tons (Mt) in July. The WSA noted that due to the difficulties presented by the pandemic, many of the figures for July are estimates that may be revised with next month’s production update.
China Churns Out Record Steel
Crude steel production from China — the world's biggest steel producer — shot up in July to an all-time high on robust domestic demand, buoyed by government investment in infrastructure.
Per the WSA, production in China, which now accounts for more than 60% of the global steel output, spiked 9.1% year over year to 93.4 Mt in July. For the first seven months of 2020, output rose 2.8% year over year to roughly 593.2 Mt.
China, which came out of the lockdown ahead of other countries, is gradually recovering from the fallout of the pandemic. China’s steel production tumbled in March as steel mills in the country scaled down production in the wake of a slowdown in domestic demand and a pile-up in finished steel inventories. Production started to recover in April on the back of the restart of idled capacity and higher utilizations.
How Other Major Producers Fared in July?
Among the other major Asian producers, India saw a 24.6% decline in production to 7.2 Mt in July, the fifth consecutive month of decline. Disruptions due to the coronavirus crisis are hurting domestic steel demand.
Production in Japan also dropped 27.9% to 6 Mt in the reported month. Steel makers in the country have been hit by weak demand from the manufacturing sector amid the virus crisis. Crude steel output in South Korea also fell 8.3% to 5.5 Mt. Consolidated output rose 2.3% to 116.5 Mt in Asia.
In North America, crude steel production slumped 29.4% to 5.2 Mt in the United States in July.
Coronavirus has wreaked havoc on the U.S. steel industry. The pandemic has sapped demand for steel across major end-use markets such as construction and automotive. The low demand environment has forced domestic steel mills to curtail production with capacity utilization plummeting to multi-year lows this year. U.S. steel prices have also come under pressure this year amid a muted demand environment.
Meanwhile, output in Canada dropped 24.5% to around 0.8 Mt while in Mexico it fell 22.6% to roughly 1.2 Mt in July. Overall production in North America tumbled 28% to roughly 7.2 Mt.
In the Europe Union (EU), production from Germany, the biggest producer in the region, went down 24.7% to 2.4 Mt. Output fell 11.2% in Italy to roughly 1.8 Mt. France also saw a 34.5% slump to 0.9 Mt while output dropped 31.6% in Spain to around 0.6 Mt. Total output was down 24.4% in the EU to around 9.8 Mt.
Soft demand in automotive and construction is hurting steel producers in Europe. Lower demand has forced steel producers in Europe to cut their capacity to adapt to the challenging situation.
The WSA sees steel demand in the EU to contract 15.8% this year. The manufacturing sector in the EU was expected to rebound in 2020 following a recession in 2019. However, it has been pushed into a deeper recession amid lockdowns that led to a significant decline in orders. The trade body expects the automotive sector in the region to be the worst hit.
Moreover, output in the Middle East edged down 0.8% to 3.2 Mt in July. Iran, the top producer in the region, saw a 14.4% rise to roughly 2.3 Mt. Africa recorded a 12% decline to around 0.9 Mt in July.
Among other notable producers, output from Turkey went up 7.4% to 3.1 Mt. Production from Brazil, the largest producer in South America, rose 3.5% to roughly 2.6 Mt.
What Lies Ahead?
Moving ahead, steel production in China is likely to continue to rise on the back of a rebound in domestic demand and economic activities. A recovery in construction and manufacturing activities is driving demand for steel in China, the world’s top consumer of the commodity.
Steel mills in China are likely to further beef up production on optimism that government stimulus measures will boost domestic steel demand. Beijing is looking to stimulate the economy with big infrastructure spending and is also taking steps to boost domestic consumption. Steel demand is expected to be driven by government spending in infrastructure projects.
The WSA envisions steel demand in China to rise 1% in 2020. All major steel-consuming sectors in China were back to near full productivity by the end of April. The trade body expects steel demand in China to be driven, in the second half of 2020, by the construction sector that has already attained full productivity.
Construction will be supported by infrastructure investment driven by Beijing’s new infrastructure push. The automotive industry is also expected to be backed by incentive measures. However, the recovery in China’s manufacturing sector is expected to be slow due to the global economic slowdown, per the WSA. A faster recovery in China than the rest of the world is expected to mitigate the anticipated decline in this year’s global steel demand.
Gerdau has delivered an earnings surprise of 65.9%, on average, over the trailing four quarters. The Zacks Consensus Estimate for the current year has been revised 400% upward over the last 60 days. The company’s shares are also up around 41% over the past three months.
Schnitzer Steel delivered an earnings surprise of 41.3%, on average, over the trailing four quarters. The consensus estimate for the current year also has been revised 600% upward over the last 60 days. The stock is also up roughly 22% over the past three months.
TimkenSteel has expected earnings growth of 22.4% for the current year. The Zacks Consensus Estimate for the current year has been revised 47.8% upward over the last 60 days. The company also delivered an earnings surprise of 28.3%, on average, over the trailing four quarters.
L.B. Foster delivered an earnings surprise of 4,200% in the last reported quarter. The consensus estimate for the current year also has been revised 161.5% upward over the last 60 days. The stock is also up roughly 16% over the past three months.
Zacks’ Single Best Pick to Double
From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.
The sky’s the limit for this emerging tech giant. And the earlier you get in, the greater your potential gain.
Image: Bigstock
World Steel July Output Skids Despite Record China Production
Global crude steel production retreated in July as a surge in production from China to a new record high was more than offset by declines across other major producers. Disruptions associated with the coronavirus pandemic continued hurt output across several steel-producing regions.
Per the latest World Steel Association (“WSA”) report, crude steel production for 64 reporting nations slipped 2.5% year over year to 152.7 million tons (Mt) in July. The WSA noted that due to the difficulties presented by the pandemic, many of the figures for July are estimates that may be revised with next month’s production update.
China Churns Out Record Steel
Crude steel production from China — the world's biggest steel producer — shot up in July to an all-time high on robust domestic demand, buoyed by government investment in infrastructure.
Per the WSA, production in China, which now accounts for more than 60% of the global steel output, spiked 9.1% year over year to 93.4 Mt in July. For the first seven months of 2020, output rose 2.8% year over year to roughly 593.2 Mt.
China, which came out of the lockdown ahead of other countries, is gradually recovering from the fallout of the pandemic. China’s steel production tumbled in March as steel mills in the country scaled down production in the wake of a slowdown in domestic demand and a pile-up in finished steel inventories. Production started to recover in April on the back of the restart of idled capacity and higher utilizations.
How Other Major Producers Fared in July?
Among the other major Asian producers, India saw a 24.6% decline in production to 7.2 Mt in July, the fifth consecutive month of decline. Disruptions due to the coronavirus crisis are hurting domestic steel demand.
Production in Japan also dropped 27.9% to 6 Mt in the reported month. Steel makers in the country have been hit by weak demand from the manufacturing sector amid the virus crisis. Crude steel output in South Korea also fell 8.3% to 5.5 Mt. Consolidated output rose 2.3% to 116.5 Mt in Asia.
In North America, crude steel production slumped 29.4% to 5.2 Mt in the United States in July.
Coronavirus has wreaked havoc on the U.S. steel industry. The pandemic has sapped demand for steel across major end-use markets such as construction and automotive. The low demand environment has forced domestic steel mills to curtail production with capacity utilization plummeting to multi-year lows this year. U.S. steel prices have also come under pressure this year amid a muted demand environment.
Meanwhile, output in Canada dropped 24.5% to around 0.8 Mt while in Mexico it fell 22.6% to roughly 1.2 Mt in July. Overall production in North America tumbled 28% to roughly 7.2 Mt.
In the Europe Union (EU), production from Germany, the biggest producer in the region, went down 24.7% to 2.4 Mt. Output fell 11.2% in Italy to roughly 1.8 Mt. France also saw a 34.5% slump to 0.9 Mt while output dropped 31.6% in Spain to around 0.6 Mt. Total output was down 24.4% in the EU to around 9.8 Mt.
Soft demand in automotive and construction is hurting steel producers in Europe. Lower demand has forced steel producers in Europe to cut their capacity to adapt to the challenging situation.
The WSA sees steel demand in the EU to contract 15.8% this year. The manufacturing sector in the EU was expected to rebound in 2020 following a recession in 2019. However, it has been pushed into a deeper recession amid lockdowns that led to a significant decline in orders. The trade body expects the automotive sector in the region to be the worst hit.
Moreover, output in the Middle East edged down 0.8% to 3.2 Mt in July. Iran, the top producer in the region, saw a 14.4% rise to roughly 2.3 Mt. Africa recorded a 12% decline to around 0.9 Mt in July.
Among other notable producers, output from Turkey went up 7.4% to 3.1 Mt. Production from Brazil, the largest producer in South America, rose 3.5% to roughly 2.6 Mt.
What Lies Ahead?
Moving ahead, steel production in China is likely to continue to rise on the back of a rebound in domestic demand and economic activities. A recovery in construction and manufacturing activities is driving demand for steel in China, the world’s top consumer of the commodity.
Steel mills in China are likely to further beef up production on optimism that government stimulus measures will boost domestic steel demand. Beijing is looking to stimulate the economy with big infrastructure spending and is also taking steps to boost domestic consumption. Steel demand is expected to be driven by government spending in infrastructure projects.
The WSA envisions steel demand in China to rise 1% in 2020. All major steel-consuming sectors in China were back to near full productivity by the end of April. The trade body expects steel demand in China to be driven, in the second half of 2020, by the construction sector that has already attained full productivity.
Construction will be supported by infrastructure investment driven by Beijing’s new infrastructure push. The automotive industry is also expected to be backed by incentive measures. However, the recovery in China’s manufacturing sector is expected to be slow due to the global economic slowdown, per the WSA. A faster recovery in China than the rest of the world is expected to mitigate the anticipated decline in this year’s global steel demand.
Steel Stocks Worth a Look
A few stocks currently worth considering in the steel space are Gerdau S.A. (GGB - Free Report) , Schnitzer Steel Industries, Inc. , TimkenSteel Corporation and L.B. Foster Company (FSTR - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Gerdau has delivered an earnings surprise of 65.9%, on average, over the trailing four quarters. The Zacks Consensus Estimate for the current year has been revised 400% upward over the last 60 days. The company’s shares are also up around 41% over the past three months.
Schnitzer Steel delivered an earnings surprise of 41.3%, on average, over the trailing four quarters. The consensus estimate for the current year also has been revised 600% upward over the last 60 days. The stock is also up roughly 22% over the past three months.
TimkenSteel has expected earnings growth of 22.4% for the current year. The Zacks Consensus Estimate for the current year has been revised 47.8% upward over the last 60 days. The company also delivered an earnings surprise of 28.3%, on average, over the trailing four quarters.
L.B. Foster delivered an earnings surprise of 4,200% in the last reported quarter. The consensus estimate for the current year also has been revised 161.5% upward over the last 60 days. The stock is also up roughly 16% over the past three months.
Zacks’ Single Best Pick to Double
From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.
The sky’s the limit for this emerging tech giant. And the earlier you get in, the greater your potential gain.
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