China's Iron and Steel Association released data on Wednesday that showed the country's mills forged over 2 million tonnes of steel per day over the first 10 days of April.
It was the first time the daily production rate climbed over the 2 million tonne bar. China's national crude steel output stood at 61.58 million tons in March, up 3.9% over last year, while first quarter figures totaled 174.22 million tons, a 2.5% increase.
China produces produces nearly 50% the globe’s steel and the country consumes more than 60% of the 1 billion tonne seaborne global iron ore trade. Any slowdown in China has a huge impact on the fortunes of the big three miners BHP Billiton, Rio Tinto and Vale which dominate the iron market.
While today's news should allay some fears about an economic – and specifically construction – slump in China, the medium term outlook is still cloudy.
CISA cautions that while output is up domestic steel prices have been weak since early this year and inventories have been climbing. As of April 6, distributor stocks amounted to 17.76 million tonnes, up 870,000 tonnes from a year earlier. "There would be great downward pressure on the prices for months ahead," the association says on its website.
Stocks of iron ore have also been climbing. Last week iron ore inventories grew 1 million tonnes from the week before. Almost 98 million tonnes are now stockpiled at China's 30 main ports.
The benchmark import price of 62% iron ore fines at China’s Tianjin port was $148.50 a tonne on Wednesday, a six month high and up from a low for 2012 of $134 in mid-February.
The price is up more than 27% from lows struck in October last year when the steelmaking ingredient experienced a mini crash with spot declining from a record high of $180 to $116. The last time iron ore traded above $150 was mid-October 2011.
The other vital ingredient for steelmaking – coking coal – has been trading steady this year around the $200 a tonne level, down from a temporary spike above $300 a tonne following floods in Australia early 2011.
The Financial Times quotes an analyst as saying the the country's growth in demand for steel will slow to 6.5% this year after 10%+ annual expansion over most of the last ten years and spoke to Ephrem Ravi, an analyst at Barclays in Hong Kong:
“I wouldn’t call it a strong demand recovery but things are improving at the margin. [...] Things are not going back to the 2010 go-go days.”