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Crude Steel Output Trudge Higher in October

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Global crude steel production rose in October on the heels of gains across China, Japan and the U.S., according to a recent World Steel Association (“WSA”) report. The international trade body for the iron and steel industry said that crude steel output for 65 reporting nations rose 6.6% year over year in October to 134 million tons (Mt). This compares favorably with a 6.1% rise in September.

China, the world's largest steel producer, produced 65.1 Mt of crude steel in the reported month, a 9.2% year over year rise. By regions, steel output moved up across the European Union, Other Europe, North America, Asia, Africa and the Middle East, while falling in the C.I.S., South America and Oceania.

Growth was witnessed across major Asian producers. While China logged a healthy gain, Japan (the second largest producer) racked up a 7.7% increase in output to 9.5 Mt. Production crept up 1.6% to 6.8 Mt in India while rising 5.2% to 5.9 Mt in South Korea.   

In North America, crude steel production went up 8.7% to 7.4 Mt in the U.S., the third-largest steelmaker. Output in Canada fell 1.7% to 1.1 Mt while increasing 1.7% to 1.6 Mt in Mexico.  

In the Europe Union, output from Germany moved up 1.9% to 3.8 Mt while climbing 17.9% to 1.1 Mt in the UK. Production fell 1.8% in France and 10.1% in Italy to roughly 1.3 Mt and 2.2 Mt, respectively. Spain and Turkey saw a 23.9% and 6.9% rise in output, respectively. Overall output rose 4% in the European Union to 14.7 Mt.

Among other notable producers, output went down 2.8% and 1.5% in Brazil and Russia, respectively, to roughly 3 Mt and 5.7 Mt, respectively. Ukraine registered a 1.2% increase to 2.6 Mt.

The WSA noted that crude steel capacity utilization ratio for the reporting countries rose to 77.5% in October from 75% a year ago. The ratio, however, declined from 79.3% in Sep 2013.

Steel makers globally are grappling with weak prices due to soft demand and overcapacity in the industry. Moreover, steel producers have been hobbled by rising prices of key raw materials such as iron ore and coking coal.

Last year, a sluggish construction market, oversupply in the industry, challenging conditions in Europe and slowing growth in emerging economies weighed on the performance of major steelmakers, including ArcelorMittal (MT - Free Report) , U.S. Steel (X - Free Report) , Nucor (NUE - Free Report) and AK Steel (AKS - Free Report) . Lower steel prices hurt margins of these steel players.

According to the WSA, world crude steel production rose 1.2% year over year to clock 1,548 Mt in 2012. Global steel demand is expected to improve gradually this year and the next.

The WSA envisions global steel usage to increase 3.1% this year, an improvement from a 2% rise in 2012. The optimism reflects a recovery in demand driven by emerging economies. The demand scenario looks brighter in 2014 as the industry body anticipates steel usage to grow 3.3% factoring in higher contributions from the developed economies.

Strength in the auto sector and a turnaround in non-residential construction and housing markets are expected to aid to growth in the U.S. Moreover, efforts of the Chinese government to rebalance its economy will contribute to the domestic and global steel demand. However, the Eurozone crisis remains as overhang on the steel industry.

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