World Steel Association reported 4% YoY rise in global crude steel production:: EMkay

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World Steel Association reported 4% YoY rise in global crude steel production

World steel association has reported crude steel production for the month of May 2011 at 129.9 mt, up 4.2% YoY. Among the developed countries European Union has seen a drop in production by 1.3% on YoY basis to 16.3 mt. Production for US was reported at 7.3 mt flat YoY. Japan’s crude steel production fell to 9 mt down by 7% YoY due to devastation caused by the earthquake. In case of developing countries China’s crude steel production rose to all time high of 60.2 mt, up by 7.8% YoY. India’s production on the other hand remained flat on YoY at 5.9 mt. Brazil has shown sharp rise in its crude steel production by 14.7% to 3.3 mt.

The capacity utilization rates remained still high at 81.7% for the month of May, though marginally down from above 82% reported in April 2011.

We believe, going forward there could be some slow down in Chinese steel production as its indicated by slight fall in daily production run rate in May to 1.94 mt compared to 1.98 mt in April. We feel the fall in production would follow some slow down in demand however with a lag. This may help building up some inventory, which should put pressure on the steel prices globally. Raw material prices on the other side are not likely to fall immediately, thus margin pressure is likely to continue for at least a couple of quarters.