Dismal economic indicators have led customers to buy only as much metal as needed, keeping steel shipments down and output low.

Steel shipments from the United States and Canada have decreased for two consecutive months as continued economic uncertainty kept customers from buying more than absolutely necessary.

According to the American Iron and Steel Institute (AISI), the U.S. shipped 4.576 million tons steel in January — or half the January 2008 total. It was also a decrease of 0.8 percent from December’s steel shipment total of 4.613 million tons. The steep deterioration in the world economy has caused users of steel, such as construction and automotive firms, to scale back on orders, the Financial Times reports.

Shipments to automotive customers were down 58.3 percent and shipments to construction fabricators and contractors dropped 59.6 percent for the month against the previous year, AISI continues. Shipments to oil and gas markets were down 20.2 percent in January versus the same month in 2008.

In February, steel shipments from both countries fell by more than 40 percent from 2008 levels, the Metal Service Center Institute reports.

Shipments of U.S. steel products totaled 2.4 million tons last month, down 43.3 percent from February 2008 volumes. At current shipping rates, a month-end inventory of 8.3 million tons equal to a 3.4-month supply.

At the same time, Canada shipped 385,100 tons of steel, sliding 42.1 percent from February 2008. With 1.2 million tons of month-end inventory, it has a 3.1-month supply at current shipping rates.

Unsurprisingly, steel output in the U.S. also fell in February. The U.S. produced 3.8 million tons of steel last month, a decrease of 54.2 percent from February 2008, the World Steel Association says. Comparable declines were seen globally as world steel output fell 22 percent in February.

In the European Union, there were production drops of 31.6 percent in Germany, 35.7 percent in France, 35.7 percent in Spain and 39.9 percent in Italy. Brazilian steel production decreased by 39 percent last month from February 2008 totals, and both Russia and Ukraine saw steel output fall by 32.1 percent and 33.6 percent respectively.

Iran and China were the only two countries who reported positive gains. Iran steel production gained 15.9 percent from February 2008 to 900,000 tons. China produced 40.4 million tons of February’s overall world production of 84 million tons. The country reported an increase of 4.9 percent from last year’s same-month total.

Not all the steel, however, is being used. In fact, steel and other industrial products exceed domestic and foreign demand. “As of this month, about 30 percent of the nation’s aluminum production capacity is idle, as is 20 percent of cement and plate-glass capacity and 70 percent of semiconductor production,” according to China’s industry ministry (via the Wall Street Journal).

To combat the surplus, the Chinese government invested four trillion yuan (about $585 billion) to boost construction of public works, thereby increasing demand for steel and thus reducing idle capacity. Along with the stimulus package, Beijing announced another plan in January for reducing steel overcapacity.

The plan indicates that “new capacity would be approved only in exchange for the closure of outdated production facilities,” a separate Financial Times article says. The Chinese government also added that “within three years, it wanted to see 45 percent of the market in the hands of the top five steelmakers, up from 28.5 percent now.”

Elsewhere in Asia, February steel output slid 24.8 percent in South Korea and 44.2 percent in Japan from 2008.

One month on, steel production in the U.S. continues to decline. As of the week ended March 21, U.S. steel output was 2.14 million tons, a separate AISI report notes. That is a 52 percent decrease from the same period last year, but is up 5.3 percent from the week ended March 14, 2009. Year-to-date steel production through March 21 was 11.692 million tons, 52.7 percent less than 2008.

Aluminum shipments last month fared slightly better in Canada, but did worse in the U.S.

Canadian aluminum product shipments were down 26.8 percent in February, shipping merely 10,600 tons. Inventories at the end of February totaled 32,800 tons of aluminum, and at current shipping rates, equal to a 3.1-month supply.

The U.S. shipped 83,200 tons of aluminum in February, 45.9 percent less than same month last year. At current shipping rates, the nation’s 347,900 tons of aluminum inventory equal to a 4.2-month supply.

Lakshmi Mittal, chairman of ArcelorMittal, the world’s largest steel maker, told the Financial Times last month that the forecasts of world steel demand falling by 10 percent this year — making it the biggest year-on-year decline since 1945 — were “plausible.” Still, Mittal said output could start to climb after the first three months of 2009.

“The first quarter of 2009 would probably mark the bottom of the market for the steel industry,” Mittal continued. “After this, I can envisage some kind of pick-up in shipments, as customers will find they need to re-order to build up stocks, which have now fallen to very low levels.”

Resources

Steep Steel, Aluminum Shipment Declines Continue in U.S., Canada
Metals Service Center Institute, March 17, 2009

January Steel Shipments Down 50.5 Percent from Last Year
American Iron and Steel Institute, March 20, 2009

This Week’s Raw Steel Production (for Week Ending March 21)
American Iron and Steel Institute

February 2009 Crude Steel Production
World Steel Association, March 20, 2009

Stimulus Dilemma for China (subscription required)
by Andrew Batson
The Wall Street Journal, March 21, 2009

Beijing Drives Carmaking and Steel Consolidation (subscription required)
by Kathrin Hille
Financial Times, March 22, 2009

Mittal Calls Bottom of Steel Market (subscription required)
by Peter Marsh
Financial Times, Feb. 11, 2009