Global crude steel production rose 2.2% year-on-year in August 2023 to 152.6Mt, with China’s production rising 3.2% and the rest of the world 0.9%. If annualised, China’s steel production would post a record level while the rest of the world’s output would be flat.

In August, global crude steel production showed a slow recovering trend, with regional disparities. Global output rose 2.2% year-on-year, driven by China (+3.2%) and India (+17.4%). Production dropped in the European Union (-4.4%), in Japan (-2.9%) and in Latin America (-8.1%) but increased in the USA (+1.1%), Russia (+8.9%) and in most Southeast Asian countries. During the Jan-Aug period, total steel production increased by 0.3%, with China’s output rising 2.7% and the rest of the world declining by 2.8%. Production in the EU declined -9.8%, in Japan -3.8%, in the US -1.9% and in Latin America -7.5%. India posted a 10.5% increase, South Africa 14.4%, Russia 3.9%, and the Middle East region 0.4%.

If annualised, China’s steel production would reach an all-time high of 1,073Mt. Such a high number may appear surprising considering the weakness of the Chinese domestic economy, the low construction activity, and the depressed property market. However, China’s steel exports increased 29% year-on-year during the first eight months of the year to 59.5Mt. Meanwhile, steel imports were at 5.1Mt, a 32% year-on-year decline. Steel exports went primarily to Southeast Asia (+17.2%), Middle East and Africa (+41%), East Asia (+28%) and Central and South America (+41%). The main markets have been Vietnam, the UAE and Saudi Arabia.

The main reason behind the export rise has been the depreciation of the Renminbi (-9% vs. its highest February level) and China’s Hot Rolled Coil (HRC) export price dropped from US$630 in March to US$540-550 in September, on a FOB basis. Another reason has been the relaxed attitude taken by the Chinese government with regard to environmental regulations. Unlike in previous years, there have been no production cut directives in 2023, most likely to support the steel industry, given the weak Chinese domestic economy. Project Blue believes that some cuts in production will take place in Q4, although with a magnitude difficult to forecast. If we assume that production in the last months of the year will average 85Mt, (August production was 86.4Mt), implied Chinese steel production would be about 1,050Mt in 2023, the second-highest level since 2020 when output was 1.065Mt.

Steel exports could remain high in 2024 given the uncertainty in the Chinese economy, with China looking at gaining market share in Southeast Asia, the Middle East and Africa. Meanwhile, exports to Europe and North America have been low with more downside as carbon taxes and Europe’s CBAM mechanism will act as trade barriers.

In the rest of the world, steel production during the first eight months of the year has been a good reflection of economic trends, with Europe underperforming and the USA outperforming. Although steel production is showing some uptick in Europe, the outlook remains subdued and steel production should remain low on a three-to-six month horizon. India kept its impressive production growth (+10.5%), thanks to its strong and relatively insulated domestic economy, while steel production in Southeast Asia should see a recovering trend in the last part of the year.

Globally, Project Blue forecasts steel output of 1,917Mt in 2023 compared to 1,883Mt in 2022, with China at 1,050Mt (vs 1,016Mt) and the rest of the world at 687Mt, unchanged compared to 2022.