Global crude steel production growth has shown an uptick after a decline in growth rates since May. In October, steel production was up by 2.4% year-on-year (y-o-y) after rising by just 0.9% in the previous month, according to the World Steel Association. Output rose by 4.6% compared with the previous month, reversing an absolute decline in steel output seen for four successive months.

China’s attempts to temper the pace of its economic expansion was the main factor behind the slower growth in earlier months. Its steel production was down by as much as 5.9% in September. Last month, the decline in China’s steel production was lower at 3.8% on a y-o-y basis. On a sequential basis, its production was higher by 5%, after having declined for five months in a row. Also, China’s steel production in early November was up by around 2% compared with late October, according to a recent Reuters report. China seems to be losing its resolve to contain steel production.

Graphic: Yogesh Kumar/Mint

Indian steel producers had reported better results in the domestic market in the September quarter, partly because the influx of Chinese steel had moderated. While imports of finished steel were up by 73% y-o-y in the June quarter, they rose by only 21% in the half year ended September, according to the joint plant committee of the ministry of steel. If imports begin rising again, that may again put pressure on domestic producers, who have already been hit by an appreciating rupee.

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India’s crude steel output was up by 8.8% during October, and between January and October, production has been up by 7.8%, indicating it is maintaining steady growth. Joint plant committee data shows that finished steel consumption between April-October rose by 8.5% while finished steel output rose by 4.3%, with the gap being met from stocks and imports. As domestic steel producers ramp up their downstream capacities in the years ahead, they will bridge the demand-supply gap.

The share prices of major steel companies such as Tata Steel Ltd, JSW Steel Ltd and Steel Authority of India Ltd have been falling since 9 November, and are down by between 3% and 7%. Apart from falling stock indices, some concerns on the price front could be emerging as well.

Spot prices of flat steel are down by around 2% in November, compared with the previous month. Also, iron ore prices are rising steadily due to rising demand. Average prices for Chinese iron ore imports so far this month are up by 7% compared with October. If the outlook for prices remains weak and costs continue to inch up, margins, which were below expectations in the September quarter, will remain under pressure. And share prices may continue to underperform, too.