May global steel production declined 1.8% from April’s all-time high of 4.29 million tonnes per day (mtpd), marking the first drop in five months and breaking from the typical sideways trend in the month.  Global capacity utilization also declined to 79.6%, after hitting a 10-month high of 81.3% in April.

What is disconcerting to us, is that despite the relative strength we are seeing in the US steel market this year, steel production is nearly 13% below the pre-recession peak in 2008 due in part to a 31% surge in imports year-to-date, as overproduction in China has led to a 23% increase in net exports so far this year.

Chinese steel production for the first 10 days of June reversed the recent downtrend we had seen since peaking in early May, rising some 2.0% from 1.96 mtpd in late May to 2.0 mtpd, the equivalent of 732 mt on an annualized basis, which is 7% above prior full-year peak production.

Our full report is available to subscribers only and provides further thoughts on global steel production and pricing and the implications for steel equities.