Around the world, in many of the main countries importing steelmaking raw materials — chiefly iron ore and coking coal — steel production has weakened during the 2016 first half. Although signs of a pick up have emerged recently in China, the dominant raw materials importer, evidence pointing to a more broadly spread revival is still awaited, and the timing currently seems highly uncertain.

Earlier this year there was fading confidence in predictions of another substantial rise in China’s iron ore purchases from foreign suppliers. These comprise over two-thirds of the entire global seaborne iron ore trade, which now exceeds 1.3 billion tonnes annually, and are therefore a crucial influence. But in the past few months momentum has been regained. Elsewhere, among other significant raw materials importers — the European Union, Japan, South Korea - adverse influences remained prominent.


Figures covering this year’s first five months show a largely negative pattern of steel output changes evolving in various countries. These changes reflect economic activity as a general driver and, more precisely, progress in manufacturing industries and construction work using steel. Inventory changes and steel products exports and imports flows also contribute to determining how much steel is produced.

Reductions in crude steel output during the 2016 first five months were widespread. Compared with the same period a year earlier, Japan’s production was 2% lower at 43.2mt (million tonnes), based on World Steel Association statistics, while South Korea experienced a 3% decline to 27.9mt. By contrast India, a prominent coking coal importer, achieved a positive outcome, raising steel production by 2% to 38.6mt.

In the EU a large percentage decline of 6% occurred, reducing steel output to 68.9mt, although individual member country’s experiences varied greatly. Germany, the largest element, saw only a marginal 1% decrease to 18.2mt, while Poland’s figure was 5% lower at 3.9mt. By contrast, Italy’s total reversed the general EU trend with a rise of 3% to 10.1mt. In Spain, however a 9% reduction to 6.0mt was seen.

China’s steel industry operates on a gigantic scale which is far greater than in any other country. Production was marginally lower by 1% in the January–May period of 2016 at 330.0mt. But typically the total is revised upwards when more complete information is available, so the actual decrease may be smaller.

Prospects for the balance of this year suggest that weakness will remain evident. There are doubts about whether a continuing modest strengthening in China, as seen in the past few months, will persist. In other countries optimism for a reversal of steel output cuts is limited at present.


Expectations for another advance in China’s iron ore imports in 2016 as a whole have risen. More evidence emerged within the past couple of months suggesting that steel production is on a reviving trend, at least in the short term, while iron ore volumes received from foreign suppliers also strengthened.

At the beginning of this year signs pointed to continuing potential for domestic iron ore production in China, mainly high- cost and relatively low quality, to be further displaced by low- cost, high quality foreign supplies from Australia, Brazil and elsewhere. But an offsetting influence was decreasing steel output (after a 2% decline in 2015, as shown in the table), reflecting weakening demand from Chinese users, especially in the construction sector.

Since then steel production has recovered somewhat, aided by the Chinese government’s economic stimulus measures designed to support activity and restrain the longer term slowing trend. More solid monthly steel output volumes have been accompanied by stronger iron ore imports, which rose by 34mt or 9% in January–May 2016, reaching 412mt. An annual increase of that percentage magnitude seems unlikely, but a sizeable increase is beginning to appear a plausible view.

Another factor which could affect iron ore imports into China in the period ahead is any change in inventories. Port stocks reportedly now exceed 100mt. If a reduction occurs, it will have a negative impact. Despite the uncertainties last year’s iron ore imports volume, 933mt (most of which is seaborne movements), looks set to be raised. Coking coal imports are much smaller, at 48mt last year including land movements, and may be at a similar level in the current year.


Among other raw materials buyers, positive indications for iron ore and coking coal import demand are not prominent. In many countries domestic demand for steel remains subdued, awaiting a pick up in economic activity which could benefit steel-using industries. Prospects for steel products exports also seem limited, while steel products imports volumes in some countries have risen sharply.

In the European Union, where weakness has been especially apparent, a recent report by the European Steel Association projected flat steel demand across the EU this year. Although consumption could rise marginally, stocks may act as a restraint on output and high import flows are another adverse influence.

Neither Japan nor South Korea look set to boost steel production greatly in the near future. Demand and production patterns in Japan provide no clear signs that output this year will exceed the volume seen in the previous twelve months. In South Korea, similarly, positive indications are not prominent.

Richard Scott