The international ratings agency Moody's Investors Service said on March 29 that world crude steel production has recovered to pre-crisis levels, but consumption is expected to fall when stimulus measures in China end.
Global steel output for January 2010 was a record at 113.4 million metric tons, exceeding the previous record of 112.9 million metric tons for the same month in 2008, while output in February this year was 108 million metric tons, at the same level as in February 2008, according to the Moody's report. Global steel production had regressed to 86.8 million metric tons in January 2009 and 86.6 million metric tons in February last year.
Moody's said steel output has followed a V-shaped rebound from its lows around the turn of calendar year 2008-09 when the global financial crisis was at its height. The increase in steel production supports a similar V-shaped recovery in prices for primary steelmaking raw materials, such as iron ore and metallurgical coal.
Moody's said Asian steel producers had to pass on higher input costs to their customers but a rise in steel utilization would allow them to regain pricing power and would more than offset the effect of higher costs. However, the report assess that an end to the Chinese government's stimulus packages would dent steel consumption.
"These governments have withdrawn these incentives, or are planning to do so, which means that the heady growth in demand for steel products will abate. We expect Asian steel producers' profitability to show considerable year-over-year improvement in 2010 on the back of the robust economic growth in China and recovery in exports, but higher input costs and persistent Chinese oversupply will likely keep the level of earnings lower than it was pre-crisis." Moody's said.