Stocks piled up at producers’ warehouses have forced the crude steel producers to reduce their production and price to keep the market equilibrium.
As per the World Steel Association (worldsteel), steel production of 66 countries declined by 12.4% YOY to 100.5 Million Metric Tons this October. It was 6.9% lower than the level recorded in September, reported CommodityOnline.
Starting from January to October, the global crude steel production reached 1,136.2 Million Metric Tons. However, growth rate of crude steel Moving Annual Total (MAT) dropped to 3% globally in October. Asia dominated the production, but its production levels dropped by 11.6% in October to 56.9 Million Metric Tons on YOY basis due to a fall in China’s crude steel output in October, whose YOY production slipped 17% to 35.9 Million Metric Tons. Other regions, like North American, South America and EU, also witnessed a downward trend.
Current financial crunch was blamed for the slump in crude steel production in October. It resulted in the economic turmoil, and thus, steel demand melted drastically in October. As a result, steel producers lowered their production in order to maintain demand-supply equilibrium.
Along with shrinking steel demand, downturn in steel prices too hit the producers hard, forcing them to bear losses. Thus, most of the steel producers decided to cut their production to minimize the loss.
Although crude steel production has been lowered to keep the market equilibrium, it is believe that the steel demand is not likely to recover in coming few months and pilled up steel at producers’ end would further compel them to cut prices.
According to a Research Analyst at RNCOS, “A sudden drop in steel consumption level has piled up the crude steel stocks at the producers’ end. So, most of the producers have been forced to sell their stocks at lower market price to pay back their debts. They have also reduced their production in order to clear their inventories first. As the conditions are not expected to improve soon, industry players may have to face this in the coming months too.”
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