Steel output plunges

THE drop in global demand for commodities has hit steel production with analysts at Macquarie Research estimating an almost 30% year-on-year fall in stainless steel output for the fourth quarter of 2008. However, analysts remain optimistic about a recovery towards the end of the year.
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Courtesy BlueScope Steel.

Staff Reporter

In a commodities comment report, Stainless Collapse in 4Q08, Macquarie analysts noted the latest data revealed world production had plummeted 37% year on year in November.

“According to reports, December was, if anything, worse in most regions with the exception of China, where there were restarts,” the report said.

Macquarie analysts noted that while final December data for most countries would not be available for another three to four weeks, Sweden had already reported December production was a massive 53% lower than for the corresponding period in 2007.

“We estimate that world production fell by almost 30 per cent year on year in the final quarter of 2008, and we have to go back to 1975 to find a similar decline,” analysts said.

However, the report said that following the sharp collapse in 1975, there was a 25% jump in stainless steel production in 1976.

“This illustrates the extent to which destocking exaggerates the decline and restocking exaggerates the recovery, and is the reason why we remain optimistic about a stainless recovery in 4Q09 and 2010,” the report added.

While demand for steel remains weak, the report suggests better production levels for January in most regions, but still remaining well below the levels experienced in the first half of last year.

Meanwhile, Chinese steelmaker Baosteel has posted a 32% drop in its net profit in 2008 to 23 billion yuan ($A5 billion), the Shanghai Securities News reported.

The newspaper quoted an unnamed, senior Baosteel official as saying Baosteel's output in the fourth quarter fell about 30%.

Baosteel is expected to release its 2008 earnings report in late March.

Cuts in steel production had throughput down 1.4 million tonnes or 19% for December at the Hay Point and Dalrymple Bay ports in Queensland, according to Macquarie.

Hay Point, which handles most of BHP Billiton’s coking coal, exported some 36Mt last year, a drop of 8% from 2007, but the fall is also due to flood damage early on in the year as well as weaker demand towards year-end.

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