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Global Steel October Production Up Even as China Output Cools
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Global crude steel production expanded in October as continued spike in production from China — the world's biggest steel producer — neutralized declines across certain other major producers. Coronavirus-led disruptions continued hurt output across several steel-producing countries last month.
According to the latest World Steel Association (“WSA”) report, crude steel production for 64 reporting nations climbed 7% year over year to 161.9 million tons (Mt) in October. The WSA noted that due to the difficulties presented by the pandemic, many of the figures for October are estimates that may be revised with next month’s production update.
China Monthly Production Eases, but Spikes Y/Y
Crude steel production from China rose year over year in October on the back of firm domestic demand. Per the WSA, production in China jumped 12.7% year over year to 92.2 Mt in October. For the first ten months of 2020, output went up 5.5% year over year to roughly 873.9 Mt.
October output eased from 92.6 Mt in September due to production restrictions implemented by steel mills to control air pollution. China’s steel production has softened since September after hitting an all-time high of 94.8 Mt in August 2020. Nevertheless, the country’s steel production is likely to surpass 1 billion tons for the first time this year considering the current pace. Notably, China’s production jumped 8.3% year over year to 996.3 Mt in 2019.
China is gradually clawing out of the coronavirus-induced stupor, taking succour from government stimulus measures. Steel production in the country tumbled in March 2020 as steel mills cut 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.
However, China’s steel overcapacity remains an overhang for steel industry. Steel mills in China are ramping up production driven by new capacity and a rebound in domestic demand, aided by Beijing’s infrastructure push. Rising steel production in China has led to high levels of finished steel inventories in the country of late. The steel glut has also ignited concerns of China flooding global markets with cheap steel exports.
How Other Major Producers Fared in October?
Among the other major Asian producers, India saw a modest 0.9% rise in production to 9.1 Mt in October. This follows seven consecutive months of declines as disruptions due to the coronavirus crisis put a dent in demand for steel in the country. However, demand has picked up with the easing of lockdown restrictions and a rebound in economic activities. A rebound in the automotive sector coupled with increasing rural consumption have contributed to the revival in domestic steel demand.
Production in Japan slipped 11.7% to 7.2 Mt in the reported month. While steel makers in the country are seeing a recovery in demand from automakers, softness continues in the construction end-market amid the virus crisis. Crude steel output in South Korea also fell 1.8% to 5.9 Mt. South Korean steel mills are reeling under the effects of a sharp decline in demand from key steel-consuming sectors including automotive and construction. Consolidated output rose 10.4% to 120.1 Mt in Asia.
In North America, crude steel production tumbled 15.3% to 6.1 Mt in the United States in October. The virus-led demand destruction forced U.S. steel mills to scale back production and idle operations with capacity utilization plunging to a multi-year lows during the first half. However, demand for steel has picked up with the resumption of operations across major steel-consuming sectors following the easing of restrictions, leading to a recovery in capacity utilization and domestic steel production.
Meanwhile, output in Canada dropped 17.5% to around 0.8 Mt while in Mexico it rose 1.1% to roughly 1.5 Mt in October. Overall production in North America dropped 13.1% to roughly 8.5 Mt.
In the Europe Union (EU), production from Germany, the biggest producer in the region, went up 3.1% to 3.4 Mt. Output fell 4.6% in Italy to roughly 2.1 Mt. France also saw a 9.9% decline to 1.1 Mt while output dropped 7.7% in Spain to around 1.1 Mt. Total output was down 5.6% in the EU to around 12.6 Mt.
The pandemic-induced slowdown in demand in major markets has compelled steel producers in Europe to cut their capacity to adapt to the challenging situation. Moreover, the resurgence of coronavirus infections and the reintroduction of containment measures across several countries are likely to put a lid on steel demand in Europe moving ahead.
Moreover, output in the Middle East climbed 16.8% to 3.6 Mt in October. Iran, the top producer in the region, saw a 27.9% surge to roughly 2.7 Mt. Africa recorded a 5.6% decline to around 1.1 Mt in October.
Among other notable producers, output from Turkey climbed 19.4% to 3.2 Mt. Production from Brazil, the biggest producer in South America, went up 3.5% to roughly 2.8 Mt.
What Lies Ahead?
China’s steel mills will likely continue to crank up output moving ahead as demand remains healthy at home. A recovery in construction and manufacturing activities is driving demand for steel in China, the world’s top consumer of the commodity.
Steel consumption is expected to be driven, in the coming months, by government spending in infrastructure projects. China government is looking to rejuvenate the economy with big infrastructure spending.
However, the pace of growth of China’s steel production is expected to cool as government’s credit tightening measures are likely to lead to a slowdown in demand in the property sector. Moreover, measures by steel mills to cut sintering and blast furnace output across major steel-producing provinces in the country, including the top steel province of Hebei, to improve air quality during winter months are expected to keep China’s steel output growth under check through the balance of 2020. The supply restriction is also expected to lend support to domestic steel prices.
Steel Stocks Worth Considering
A few stocks currently worth a look in the steel space are Schnitzer Steel Industries, Inc. , Ternium S.A. (TX - Free Report) , Gerdau S.A. (GGB - Free Report) and Steel Dynamics, Inc. (STLD - Free Report) . While Schnitzer Steel and Ternium sport a Zacks Rank #1 (Strong Buy), Gerdau and Steel Dynamics each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Schnitzer Steel has expected earnings growth of 186.1% for the current fiscal year. The company also surpassed the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 61.1%. The stock is also up around 63% over the past six months.
Ternium beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 178.5%. The Zacks Consensus Estimate for the current year has been revised 189.5% upward over the last 60 days. The stock has also shot up roughly 69% over the past six months.
Gerdau has expected earnings growth of 50% for the current year. The Zacks Consensus Estimate for the current year has been revised 59% upward over the last 60 days. The stock is also up roughly 68% over the past six months.
Steel Dynamics beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 9.1%. The consensus estimate for the current year also has been revised 5.4% upward over the last 60 days. The stock is also up roughly 38% over the past six months.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.4% per year.
These 7 were selected because of their superior potential for immediate breakout.
Image: Bigstock
Global Steel October Production Up Even as China Output Cools
Global crude steel production expanded in October as continued spike in production from China — the world's biggest steel producer — neutralized declines across certain other major producers. Coronavirus-led disruptions continued hurt output across several steel-producing countries last month.
According to the latest World Steel Association (“WSA”) report, crude steel production for 64 reporting nations climbed 7% year over year to 161.9 million tons (Mt) in October. The WSA noted that due to the difficulties presented by the pandemic, many of the figures for October are estimates that may be revised with next month’s production update.
China Monthly Production Eases, but Spikes Y/Y
Crude steel production from China rose year over year in October on the back of firm domestic demand. Per the WSA, production in China jumped 12.7% year over year to 92.2 Mt in October. For the first ten months of 2020, output went up 5.5% year over year to roughly 873.9 Mt.
October output eased from 92.6 Mt in September due to production restrictions implemented by steel mills to control air pollution. China’s steel production has softened since September after hitting an all-time high of 94.8 Mt in August 2020. Nevertheless, the country’s steel production is likely to surpass 1 billion tons for the first time this year considering the current pace. Notably, China’s production jumped 8.3% year over year to 996.3 Mt in 2019.
China is gradually clawing out of the coronavirus-induced stupor, taking succour from government stimulus measures. Steel production in the country tumbled in March 2020 as steel mills cut 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.
However, China’s steel overcapacity remains an overhang for steel industry. Steel mills in China are ramping up production driven by new capacity and a rebound in domestic demand, aided by Beijing’s infrastructure push. Rising steel production in China has led to high levels of finished steel inventories in the country of late. The steel glut has also ignited concerns of China flooding global markets with cheap steel exports.
How Other Major Producers Fared in October?
Among the other major Asian producers, India saw a modest 0.9% rise in production to 9.1 Mt in October. This follows seven consecutive months of declines as disruptions due to the coronavirus crisis put a dent in demand for steel in the country. However, demand has picked up with the easing of lockdown restrictions and a rebound in economic activities. A rebound in the automotive sector coupled with increasing rural consumption have contributed to the revival in domestic steel demand.
Production in Japan slipped 11.7% to 7.2 Mt in the reported month. While steel makers in the country are seeing a recovery in demand from automakers, softness continues in the construction end-market amid the virus crisis. Crude steel output in South Korea also fell 1.8% to 5.9 Mt. South Korean steel mills are reeling under the effects of a sharp decline in demand from key steel-consuming sectors including automotive and construction. Consolidated output rose 10.4% to 120.1 Mt in Asia.
In North America, crude steel production tumbled 15.3% to 6.1 Mt in the United States in October. The virus-led demand destruction forced U.S. steel mills to scale back production and idle operations with capacity utilization plunging to a multi-year lows during the first half. However, demand for steel has picked up with the resumption of operations across major steel-consuming sectors following the easing of restrictions, leading to a recovery in capacity utilization and domestic steel production.
Meanwhile, output in Canada dropped 17.5% to around 0.8 Mt while in Mexico it rose 1.1% to roughly 1.5 Mt in October. Overall production in North America dropped 13.1% to roughly 8.5 Mt.
In the Europe Union (EU), production from Germany, the biggest producer in the region, went up 3.1% to 3.4 Mt. Output fell 4.6% in Italy to roughly 2.1 Mt. France also saw a 9.9% decline to 1.1 Mt while output dropped 7.7% in Spain to around 1.1 Mt. Total output was down 5.6% in the EU to around 12.6 Mt.
The pandemic-induced slowdown in demand in major markets has compelled steel producers in Europe to cut their capacity to adapt to the challenging situation. Moreover, the resurgence of coronavirus infections and the reintroduction of containment measures across several countries are likely to put a lid on steel demand in Europe moving ahead.
Moreover, output in the Middle East climbed 16.8% to 3.6 Mt in October. Iran, the top producer in the region, saw a 27.9% surge to roughly 2.7 Mt. Africa recorded a 5.6% decline to around 1.1 Mt in October.
Among other notable producers, output from Turkey climbed 19.4% to 3.2 Mt. Production from Brazil, the biggest producer in South America, went up 3.5% to roughly 2.8 Mt.
What Lies Ahead?
China’s steel mills will likely continue to crank up output moving ahead as demand remains healthy at home. A recovery in construction and manufacturing activities is driving demand for steel in China, the world’s top consumer of the commodity.
Steel consumption is expected to be driven, in the coming months, by government spending in infrastructure projects. China government is looking to rejuvenate the economy with big infrastructure spending.
However, the pace of growth of China’s steel production is expected to cool as government’s credit tightening measures are likely to lead to a slowdown in demand in the property sector. Moreover, measures by steel mills to cut sintering and blast furnace output across major steel-producing provinces in the country, including the top steel province of Hebei, to improve air quality during winter months are expected to keep China’s steel output growth under check through the balance of 2020. The supply restriction is also expected to lend support to domestic steel prices.
Steel Stocks Worth Considering
A few stocks currently worth a look in the steel space are Schnitzer Steel Industries, Inc. , Ternium S.A. (TX - Free Report) , Gerdau S.A. (GGB - Free Report) and Steel Dynamics, Inc. (STLD - Free Report) . While Schnitzer Steel and Ternium sport a Zacks Rank #1 (Strong Buy), Gerdau and Steel Dynamics each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Schnitzer Steel has expected earnings growth of 186.1% for the current fiscal year. The company also surpassed the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 61.1%. The stock is also up around 63% over the past six months.
Ternium beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 178.5%. The Zacks Consensus Estimate for the current year has been revised 189.5% upward over the last 60 days. The stock has also shot up roughly 69% over the past six months.
Gerdau has expected earnings growth of 50% for the current year. The Zacks Consensus Estimate for the current year has been revised 59% upward over the last 60 days. The stock is also up roughly 68% over the past six months.
Steel Dynamics beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 9.1%. The consensus estimate for the current year also has been revised 5.4% upward over the last 60 days. The stock is also up roughly 38% over the past six months.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.4% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>