Summarised in a commodities report, notable blast furnace restarts include Korea’s POSCO plant in Gwangyang, which restarted last month and has an estimated steel capacity of 5 million tonnes per annum.

Nippon Steel is scheduled to restart a blast furnace at its Oita plant, which also has an estimated 5Mtpa capacity.

China Steel is scheduled to restart a blast furnace at its plant in Kaohsiung in Taiwan this month, while BlueScope will restart its No. 5 blast furnace at the Port Kembla Steelworks towards the end of the month.

Macquarie noted that 26 blast furnaces outside of China were scheduled to restart between July 2009 and January 2010, including nine in western Europe and nine ArcelorMittal furnaces, as well as two furnaces in Brazil which are rumoured to be resuming production in the next two months.

The analysts said improving steel production outside China had lifted spot iron prices to almost $US100 a tonne, while spot coking coal prices were around $160/t, 24% higher than benchmark contracts and around $45/t higher than the trough in spot prices during the June quarter.

“While we expect Chinese imports to slow through the 2009 third quarter for both iron ore and coking coal, higher production through the rest of the world should continue to support prices,” Macquarie said.

The analysts are expecting growth in steel production in the current quarter to be led by northern Asia while steelmakers in Europe will remain cautious, seeing an end to destocking rather than a growth in demand behind a return to higher blast furnace steel production.

“The effect of an end to destocking can be significant, however,” Macquarie said.

“For example, US steel service centre inventories were drawn down by 1.9 million short tons through the second quarter of 2009, with total shipments at 7.2Mst (down 46 per cent year-on-year).

“If this draw on stocks comes to an end through the third quarter of 2009, demand for new steel production will grow 26 per cent (1.9Mst) even without any recovery in end-user demand.”