Crude steel stable

Global crude steel production was marginally higher than January last year, which is not a huge surprise given the leading indicators have only just recently improved.

We should see crude steel production tick up slightly in the world ex-China.  China also looks for production gains, with mills confident of better demand and inventories not looking too high given the likely seasonal improvement.

Chinese crude steel production was a touch under 700mt in January.  While this is an improvement on last year, comparisons are tricky with Chinese New Year timing.  Output was slightly lower than 2011, suggesting that while things are getting better YoY, there is no obvious boom.

Stock of steel has been increasing, but that is the norm for this time of year given the seasonal uplift into Q2. Steel inventories are not obviously too high and mills are reasonably confident following the holidays.  So China's steel economy should be ok heading into mid-2013.

European steel producers are still in a world of pain.  Stabilisation is expected given less bad leading indicators, although stats like the abysmal auto sales for January will still leave many in the region nervous.

For key seaborne coking coal consumers, steel output was a little better than last year, although the comps get harder as conditions were decent in early 2012.

Some have suggested that a rapidly depreciating Yen is bad news for commodity demand given a loss of purchasing power.  This is misleading though, as the depreciation is a net benefit to commodity demand given stronger export & domestic activity.  To be sure, Japanese buyers are largely price takers with currency movements not directly affecting things too much.

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