Rapidly rising steel production in China, accompanied by sharply declining output in Europe, provided striking contrasts among key importers of the industry’s raw materials recently. Elsewhere, South Korea’s steel production also fell, but volumes in Taiwan and India were higher and Japan saw a marginal increase.

Continued expansion in China is particularly beneficial for raw materials exporting countries, including Australia, Brazil and many other suppliers, as well as benefiting port operators and shipowners employing bulk carriers in these trades. Other importers, especially Japan and the European Union, remain key elements, but iron ore movements into China are the dominant factor, together with sizeable coking coal imports.


Differing performances are underlined by figures for steel output during the first five months of 2013, compiled by the World Steel Association. In Europe, continued weakening is a prominent feature. Within the entire European Union crude steel production, at 69.9mt (million tonnes), was 4.2mt or 6% lower than seen in last year’s same period.

South Korea also saw a large reduction of 5%, to 27.6mt in this year’s January–May period. By contrast Taiwan, a smaller producer, experienced a robust 7% increase to 9.4mt. In China, where the industry operates on a vastly greater scale than in any of the other producing countries, steel production rose by 24mt or 8%, to reach 325.2mt.

This pattern may not be representative of percentage changes in the entire current year. The table below shows steel output estimates for 2013 as a whole, based on results for the first five months coupled with expectations for the remaining period. The group of countries shown accounts for about 95% of global seaborne iron ore trade and about 75% of seaborne coking coal trade.

Because of its role as a major coking coal (but not iron ore) importer, another significant country is India. Steel production at Indian mills developed positively in the first five months of 2013, growing by 3% to 33.3mt.


Amid rising steel production in China over recent months, iron ore imports continued expanding solidly. In the January-May 2013 period, Chinese importers received iron ore volumes totalling 322.1mt, a 13.4mt or 4% rise compared with last year’s same period.

Background events were not entirely favourable, however. Expectations of a gradual strengthening of the Chinese economy during the first half of this year have not been fulfilled. Despite government attempts to stimulate economic activity, growth appears to be slowing rather than accelerating, and there is much greater uncertainty about the outlook. A solid pick up in the second half is looking unlikely, implying some adverse effects on steel demand and output.

Domestic iron ore mines in China, supplying a large proportion of the country’s requirements, are another key influence. Production of this mainly inferior- quality material still appears to be on an upwards trend. But foreign supplies from Australia, Brazil, and various other sources clearly have remained highly competitive. Steel mills often prefer the higher specification ore available from these suppliers.

Over the period ahead slackening steel production may emerge, implying negative effects on iron ore usage. Conversely, support for iron ore import demand could be derived from low stocks and attractive delivered prices for foreign supplies, compared with domestic ore. Consequently a substantially increased import volume in 2013 as a whole, from last year’s 744mt, could be seen. Higher coking coal imports (54mt in 2012) also are foreseeable.


In the EU there seems to be growing confidence that the worst of the sovereign debt and banking crisis has passed, but recession persists. Amid continuing austerity measures economic recovery probably will be extremely slow, which does not suggest an encouraging outlook for the steel industry. Weakness in steel consuming industries now points to a sizeable reduction in steel output this year, as shown in the table.

A recent report published by Eurofer (European Steel Association), forecast a 2% reduction in EU steel demand during 2013, even after incorporating a turnaround to growth in the final quarter. This organization views the EU market situation over the balance of 2013 as likely to remain depressed.

Circumstances in Japan are brighter. Signs have emerged suggesting a revival of the Japanese economy following radical changes to fiscal and monetary policy introduced by the new government. While some scepticism has been expressed about how effective these will prove, beneficial results already have been seen.

Iron ore imports into Japan rose by 2% in the 2013 first five months, compared with the same period of last year, reaching 56.1mt. This strengthening reflects a modestly higher steel production trend which looks maintainable, benefiting from firmer domestic demand and also from buoyant exports of steel products. A recent survey published by the Japanese government highlighted improved domestic demand from the construction sector and related restocking.

An intriguing possibility has arisen that India could become a net importer of iron ore, as well as being a substantial coking coal importer. Indian iron ore exports have been declining rapidly in the past few years amid mine closures and high export tax. Reduced output has already caused Indian steel producers to turn towards foreign ore suppliers for limited quantities.

Richard Scott