Global steel production dips 24% in Dec quarter

FRANKFURT/LONDON: Global crude steel production tumbled in the last quarter of 2008, bringing the annual figure down slightly, as steelmakers slashed production sharply due to the slowdown. Analysts expected further weakness in 2009 as demand and growth prospects remain bleak in the major steel consuming industries.

Steel output was down 24.3% year-on-year in December, while for the whole of 2008 production stood at 1.3 billion metric tonnes, down 1.2% from the year before, figures from the World Steel Association showed on Thursday. The decline in world steel production gathered pace from September to the end of the 2008, it said.

���The international steel industry is suffering the biggest crisis in 80 years,��� said analyst Michael Broeker at Frankurt brokerage Steubing said in a research note.

���We predict another drop of 20% year-on-year will emerge in world crude steel production in January 2009. We assume a gradual recovery of the international steel industry only from the second quarter of 2009,��� he said.

Broeker���s production forecast for the whole of 2009 was at around 1.21 billion tonnes, a decline of 7% year-on-year.
Analysts at Macquarie Bank, who have downgraded their projections for the steel industry, expected an 8.1% fall year-on-year in the 2009 production.

The tide has turned for the $800 billion steel industry since the second half of 2008. Steel giants such as ArcelorMittal, Thyssenkrupp and Severstal, who have enjoyed hefty profits in the first half of last year due to booming steel prices, have begun announcing profit warnings and cutbacks and have shelved expansion plans as the recession bite.

Citi analysts do not expect to see production levels coming back to 2008 levels for several years coming. The 27 countries in the euro zone produced a total of 199 million metric tonnes last year, down 5.3%, with Germany, Italy and France recording reductions, World Steel said.

Output in North America was down 5.5%, with the US producing 91 million metric tonnes, a decrease of 6.8%. Production in Asia ��� led by China and the Middle East ��� bucked the trend, growing at 1.9% in 2008. Output from the world���s top consumer and producer of the metal, totalled 502 million metric tonnes, up 2.6%, with production volume more than doubling within five years.

It became the first country to ever make more than half a billion tonnes of steel in one year. Separately, government figures showed a rise of 7% in China���s December crude steel output ��� the first rise in six months ��� compared to November. Analysts said production may further increase in the coming months, encouraged by spending plans. Macquarie expects a modest 1.5% rise in China���s output for 2009.