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Global Steel Production Surges As China Output Hits All-Time High
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Global crude steel production shot up in May on a spike in production from China — the world's biggest steel producer — to a new record high. A rise in output was also witnessed across other major producers for the month with India, Japan and the United States seeing the biggest gains.
According to the latest World Steel Association (“WSA”) report, crude steel production for 64 reporting nations climbed 16.5% year over year to 174.4 million tons (Mt) in May. Production rose across all key regions in the reported month.
China Churns Out Record Steel
Crude steel production from China rose in May to an all-time high on the back of firm domestic demand and healthy margins at mills. Per the WSA, production in China, which accounts for more than half of the global steel output, went up 6.6% year over year to 99.5 Mt in May. Output also rose from 97.9 Mt in April. For the first five months of 2021, output climbed 13.9% year over year to 473.1 Mt.
Notwithstanding the government’s efforts to curtail production to control air pollution, China’s steel mills continue to crank up output as demand remains healthy at home. Healthy profit margins buoyed by higher demand and a rally in steel prices have led to a rise in production.
China’s steel output topped 1 billion tons in 2020 following a production ramp-up on a strong rebound in domestic demand, driven by government investment in property and infrastructure. Notably, steel production in the country tumbled in March 2020 as steel mills cut production in the wake of a slowdown in demand and a pile-up in finished steel inventories. Production started to recover from April last year on the back of the restart of idled capacity and higher utilizations.
China’s economy has roared back from the pandemic-triggered slump, aided by strict containment measures, government stimulus and a surge in exports. Strong overseas demand has led to a surge in China’s industrial production. Moreover, an upswing in construction and manufacturing activities is driving demand for steel in China, the world’s top consumer of the commodity. Steel mills in China have ramped up production driven by new capacity and a rebound in domestic demand, aided by Beijing’s infrastructure push. 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 moving forward as government’s credit tightening measures are likely to lead to a slowdown in demand in the property sector. Moreover, production curbs aimed at reducing carbon emissions are likely to keep China’s steel output growth under check in the second half.
How Other Major Producers Fared in May?
Among the other major Asian producers, India — the second-largest producer — saw a 46.9% surge in production to 9.2 Mt in May. Steel demand is picking up in the country following the resumption of industrial activities with the lifting of lockdowns and restrictions imposed by state governments to stem the rapid spread of the virus amid the second wave.
Production in Japan jumped 42.2% to 8.4 Mt in the reported month. Output rose for the third straight month as steel makers in the country are seeing a rebound in industrial demand (including automotive) from the pandemic-led slump. The increase also reflects the resumptions of blast furnaces that were suspended earlier amid a downturn in demand. Crude steel output in South Korea also rose 10.5% to 6 Mt. Consolidated output rose 11.7% to 128.4 Mt in Asia and Oceania.
In North America, crude steel production climbed 47.6% to 7.2 Mt in the United States in May. 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 of 2020. However, demand has rebounded with the resumption of operations across major steel-consuming sectors, leading to a recovery in capacity utilization and domestic steel production. U.S. capacity utilization rate broke above the important 80% level late last month for the first time since the start of the pandemic in March 2020, and is currently hovering above that level. Overall production in North America jumped 47.7% to roughly 10.1 Mt.
In the Europe Union (EU), production from Germany, the biggest producer in the region, shot up 35.5% to 3.5 Mt. Total output was up 32.7% in the EU to around 13.5 Mt.
Moreover, output in the Middle East climbed 16.8% to 3.7 Mt in May. Iran, the top producer in the region, saw a 7.7% rise to roughly 2.6 Mt. Africa recorded a 65.1% surge to 1.3 Mt.
Among other notable producers, output from Turkey climbed 42.4% to 3.2 Mt. Production from Brazil, the biggest producer in South America, went up 40.1% to 3.2 Mt in May.
Steel Industry Firing on All Cylinders
The steel industry has pulled off a strong comeback after bearing the brunt of the pandemic last year, thanks to a strong revival in demand and skyrocketing steel prices.
Coronavirus-induced demand destruction wreaked havoc on the steel industry for much of the first half of last year. However, strong pent-up demand and zooming steel prices have pulled the industry out of its pandemic-induced slumber. Steel demand has picked up with the resumption of operations across major sectors such as automotive, construction and machinery following easing of lockdowns and restrictions across the word.
Notably, the WSA envisions overall steel demand to rise 5.8% in 2021 to 1,874 Mt after edging down 0.2% last year. The forecast assumes a steady progress on vaccinations enabling a gradual return to normality across major steel-consuming nations and that the ongoing second or third waves of coronavirus infections will stabilize in the second quarter. The trade body expects steel demand to increase 3% in China this year.
Meanwhile, steel prices have witnessed an unprecedented surge this year underpinned by strong underlying supply and demand fundamentals. U.S. steel prices are on a tear on an upturn in demand, tight supply, higher raw material costs and low steel supply-chain inventories. The benchmark hot-rolled coil prices have shot up nearly four-fold from the lows witnessed in August 2020. A key reason behind the spurt in U.S. steel prices is the demand-supply imbalance. China’s steel prices have also spiked so far this year on the back of strong domestic demand. Moreover, global steel prices are moving up on higher demand and supply constraints. Higher prices bode well for the profitability of steel companies.
ArcelorMittal has expected earnings growth rate of a whopping 1,163.6% for the current year. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 20.3% upward over the last 60 days. The stock has also rallied roughly 178% over a year.
Nucor has expected earnings growth rate of 344.9% for the current year. The consensus estimate for the current year has been revised 47.9% upward over the last 60 days. It has seen its shares shoot up around 132% over the past year.
U.S. Steel has expected earnings growth rate of 305.1% for the current year. The Zacks Consensus Estimate for the current year has been revised 130.3% upward over the last 60 days. The stock has also shot up roughly 210% over the past year.
Steel Dynamics has expected earnings growth rate of 286.6% for the current year. The consensus estimate for the current year has been revised 47.9% upward over the last 60 days. The stock has also surged roughly 124% over the past year.
Schnitzer Steel has expected earnings growth rate of 1,144.2% for the current fiscal year. The consensus estimate for the current fiscal has been revised 10.3% upward over the last 60 days. The stock has also surged around 188% over a year.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.
Image: Bigstock
Global Steel Production Surges As China Output Hits All-Time High
Global crude steel production shot up in May on a spike in production from China — the world's biggest steel producer — to a new record high. A rise in output was also witnessed across other major producers for the month with India, Japan and the United States seeing the biggest gains.
According to the latest World Steel Association (“WSA”) report, crude steel production for 64 reporting nations climbed 16.5% year over year to 174.4 million tons (Mt) in May. Production rose across all key regions in the reported month.
China Churns Out Record Steel
Crude steel production from China rose in May to an all-time high on the back of firm domestic demand and healthy margins at mills. Per the WSA, production in China, which accounts for more than half of the global steel output, went up 6.6% year over year to 99.5 Mt in May. Output also rose from 97.9 Mt in April. For the first five months of 2021, output climbed 13.9% year over year to 473.1 Mt.
Notwithstanding the government’s efforts to curtail production to control air pollution, China’s steel mills continue to crank up output as demand remains healthy at home. Healthy profit margins buoyed by higher demand and a rally in steel prices have led to a rise in production.
China’s steel output topped 1 billion tons in 2020 following a production ramp-up on a strong rebound in domestic demand, driven by government investment in property and infrastructure. Notably, steel production in the country tumbled in March 2020 as steel mills cut production in the wake of a slowdown in demand and a pile-up in finished steel inventories. Production started to recover from April last year on the back of the restart of idled capacity and higher utilizations.
China’s economy has roared back from the pandemic-triggered slump, aided by strict containment measures, government stimulus and a surge in exports. Strong overseas demand has led to a surge in China’s industrial production. Moreover, an upswing in construction and manufacturing activities is driving demand for steel in China, the world’s top consumer of the commodity. Steel mills in China have ramped up production driven by new capacity and a rebound in domestic demand, aided by Beijing’s infrastructure push. 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 moving forward as government’s credit tightening measures are likely to lead to a slowdown in demand in the property sector. Moreover, production curbs aimed at reducing carbon emissions are likely to keep China’s steel output growth under check in the second half.
How Other Major Producers Fared in May?
Among the other major Asian producers, India — the second-largest producer — saw a 46.9% surge in production to 9.2 Mt in May. Steel demand is picking up in the country following the resumption of industrial activities with the lifting of lockdowns and restrictions imposed by state governments to stem the rapid spread of the virus amid the second wave.
Production in Japan jumped 42.2% to 8.4 Mt in the reported month. Output rose for the third straight month as steel makers in the country are seeing a rebound in industrial demand (including automotive) from the pandemic-led slump. The increase also reflects the resumptions of blast furnaces that were suspended earlier amid a downturn in demand. Crude steel output in South Korea also rose 10.5% to 6 Mt. Consolidated output rose 11.7% to 128.4 Mt in Asia and Oceania.
In North America, crude steel production climbed 47.6% to 7.2 Mt in the United States in May. 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 of 2020. However, demand has rebounded with the resumption of operations across major steel-consuming sectors, leading to a recovery in capacity utilization and domestic steel production. U.S. capacity utilization rate broke above the important 80% level late last month for the first time since the start of the pandemic in March 2020, and is currently hovering above that level. Overall production in North America jumped 47.7% to roughly 10.1 Mt.
In the Europe Union (EU), production from Germany, the biggest producer in the region, shot up 35.5% to 3.5 Mt. Total output was up 32.7% in the EU to around 13.5 Mt.
Moreover, output in the Middle East climbed 16.8% to 3.7 Mt in May. Iran, the top producer in the region, saw a 7.7% rise to roughly 2.6 Mt. Africa recorded a 65.1% surge to 1.3 Mt.
Among other notable producers, output from Turkey climbed 42.4% to 3.2 Mt. Production from Brazil, the biggest producer in South America, went up 40.1% to 3.2 Mt in May.
Steel Industry Firing on All Cylinders
The steel industry has pulled off a strong comeback after bearing the brunt of the pandemic last year, thanks to a strong revival in demand and skyrocketing steel prices.
Coronavirus-induced demand destruction wreaked havoc on the steel industry for much of the first half of last year. However, strong pent-up demand and zooming steel prices have pulled the industry out of its pandemic-induced slumber. Steel demand has picked up with the resumption of operations across major sectors such as automotive, construction and machinery following easing of lockdowns and restrictions across the word.
Notably, the WSA envisions overall steel demand to rise 5.8% in 2021 to 1,874 Mt after edging down 0.2% last year. The forecast assumes a steady progress on vaccinations enabling a gradual return to normality across major steel-consuming nations and that the ongoing second or third waves of coronavirus infections will stabilize in the second quarter. The trade body expects steel demand to increase 3% in China this year.
Meanwhile, steel prices have witnessed an unprecedented surge this year underpinned by strong underlying supply and demand fundamentals. U.S. steel prices are on a tear on an upturn in demand, tight supply, higher raw material costs and low steel supply-chain inventories. The benchmark hot-rolled coil prices have shot up nearly four-fold from the lows witnessed in August 2020. A key reason behind the spurt in U.S. steel prices is the demand-supply imbalance. China’s steel prices have also spiked so far this year on the back of strong domestic demand. Moreover, global steel prices are moving up on higher demand and supply constraints. Higher prices bode well for the profitability of steel companies.
Steel Stocks Worth Considering
A few stocks currently worth a look in the steel space are ArcelorMittal (MT - Free Report) , Nucor Corporation (NUE - Free Report) , United States Steel Corporation (X - Free Report) , Steel Dynamics, Inc. (STLD - Free Report) and Schnitzer Steel Industries, Inc. , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
ArcelorMittal has expected earnings growth rate of a whopping 1,163.6% for the current year. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 20.3% upward over the last 60 days. The stock has also rallied roughly 178% over a year.
Nucor has expected earnings growth rate of 344.9% for the current year. The consensus estimate for the current year has been revised 47.9% upward over the last 60 days. It has seen its shares shoot up around 132% over the past year.
U.S. Steel has expected earnings growth rate of 305.1% for the current year. The Zacks Consensus Estimate for the current year has been revised 130.3% upward over the last 60 days. The stock has also shot up roughly 210% over the past year.
Steel Dynamics has expected earnings growth rate of 286.6% for the current year. The consensus estimate for the current year has been revised 47.9% upward over the last 60 days. The stock has also surged roughly 124% over the past year.
Schnitzer Steel has expected earnings growth rate of 1,144.2% for the current fiscal year. The consensus estimate for the current fiscal has been revised 10.3% upward over the last 60 days. The stock has also surged around 188% over a year.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.
Click here for the 4 trades >>