Worldwide output of crude steel rose by nearly 20 percent above the prior-year level in June, according to new data from the World Steel Association. Despite some month-to-month fluctuations, steel production for the first half of 2010 was significantly higher than in the same period last year.

Global crude steel production increased 18 percent year-over-year in June, while the capacity utilization rate among steel manufacturers declined to 80.6 percent from 82 percent in May, still remaining 8.3 percentage points above the June 2009 level, the World Steel Association (worldsteel) reported Monday. Total production for the 66 countries tracked by worldsteel fell to 119 million metric tons in June, down from 124 million metric tons in May, though higher than the total for June 2009.

Although the decline in global steel production in June ended several consecutive monthly gains, the overall total for the first six months of the year rose to 706 million metric tons, 27.9 percent higher than in the first half of 2009. All major steel-producing regions showed production gains in the first half of 2010 versus the same period in 2009.

In China, the world’s largest steel producer, output totaled 53.8 million metric tons in June, up 9 percent from June 2009 but down from the 56.1 million metric tons in May. Japanese production climbed 35.9 percent above the previous year, reaching 9.4 million metric tons, while South Korea’s crude steel output rose 21.9 percent year-over-year, with a total of 4.8 million metric tons produced in June. Overall, Asian countries produced 448 million metric tons in the first half of 2010, 23.4 percent more than in the same period last year.

In the European Union, Germany’s crude steel output increased to 3.9 million metric tons in June, a 53.4 percent year-over-year increase, while Italy’s production rose 32.8 percent to 2.3 million metric tons and France’s output climbed 31.4 percent to 1.5 million metric tons. The E.U.’s year-to-date production total reached 90 million metric tons through June, up 44.6 percent from 2009.

Year-over-year crude steel production in the United States increased 65 percent in June, reaching 7.2 million metric tons. So far this year, the U.S. has produced 41 million metric tons of steel, 69 percent more than in the first half of 2009.

According to worldsteel, although production in the first half of 2010 was 7.2 percent higher than the same period in 2007 — before the global economic downturn — most of the world’s steel-producing markets have not yet recovered to pre-recession levels. This year, only Asia and the Middle East have had output surpass the level reached in the first six months of 2007, while production from the E.U., U.S., Eastern Europe and Canada remains 15 percent below the 2007 level.

The U.S. Geological Survey’s latest primary metals index, which tracks market indicators, fell to 142.6 in June, a 3.8 percent decrease from the revised 148.3 reading in May. Although the index’s growth rate is still positive, the June decline suggests that “the recovery in the U.S. metals industry has begun to be negatively affected by a slow domestic economy and problematic foreign economic conditions.”

Shipments from U.S. steel mills, however, have been on the rise. A report last week from the American Iron and Steel Institute found that mills shipped 7.35 million net tons of steel in May, a 4.1 percent increase from the 7.06 million tons shipped in April and 71.6 percent above the total for May 2009.

Shipments of steel products have also increased. U.S. metals service centers shipped 3.22 million tons of steel products in June, 30.8 percent more than in June 2009, according to the Metals Service Center Institute (MSCI). In the first half of 2010, steel product shipments totaled 17.6 million tons, 19.1 percent higher than in the same period last year.

Slowing demand is causing metals service centers to boost their supply levels. The MSCI report found that steel inventories rose to 7.38 million tons in June, 23.5 percent greater than a year ago.

“Steel prices tumbled in June, and U.S. steel mills are responding by cutting production,” the Wall Street Journal reports. “Earlier this year they were ramping up capacity to meet the growth in demand they hoped would emerge from the economic recovery. Instead, demand has been spotty.”

Declining demand is also driving down iron ore prices and affecting supplier relations, especially due to recent changes to iron-ore contracts that altered pricing models from a long-term system to short-term quarterly pricing.

“Based on the weak demand outlook for steel during the second half, analysts reckon that overall iron ore imports will decline further this year, the first time since 1998, from the record of 628 million tons last year,” TheStreet.com reports. “Meanwhile, global steel producers are taking initiatives to increase their vertical integration and reduce excessive reliance on mining giants.”

Earlier

World Steel Production Surges in May

The Mid-2009 State of Global Steel Production

Steelmakers Troubled Over Iron Ore Pricing

Resources

June 2010 Crude Steel Production
World Steel Association, July 20, 2010

Metal Industry Indicators
U.S. Geological Survey, July 16, 2010

May Steel Shipments Up 4.1 Percent from April
American Iron and Steel Institute, July 16, 2010

Steel, Aluminum Shipment Growth Rate Accelerates
Metals Service Center Institute, July 20, 2010

Industry Cuts Back as Steel Prices Fall
by Robert Guy Matthews
The Wall Street Journal, July 6, 2010

Falling Iron Ore Prices: Winners and Losers
by Karvy Global
TheStreet.com, July 20, 2010