Global steel production slows in July

  • Global steel production totaled 161.7 MMT in July according to the latest figures from the World Steel Association (WSA), a decrease of 3.7% MoM and the lowest figure since February. Despite a modest slowdown from June, this is still 3.6% higher YoY and the strongest output for July on record.
  • Chinese production declined 7% YoY to 86.8 MMT, the country’s greatest decline since 2008. China’s recovery in steel output since the pandemic has largely helped to satisfy global demand as others were slow to restart activity in their mills, however the WSA’s latest report indicates some regions have started to ramp up production.
  • Production in the United States totaled 7.5 MMT, increasing by 4.7% MoM and 38% YoY.
  • Apart from Asia, all other continents posted YoY increases in their output, with the EU and South American production rising by 30.4% and 21.7% respectively.
  • Following a rough few months for Indian mills due to Covid-19 disruptions, the country was able to get back on track in July, with 9.8 MMT of steel produced, an increase of 5.2% MoM and 13.3% YoY.

India to China iron ore trade declines

  • Chinese appetite for Indian iron ore has begun to slow as the country’s steel production eases. Indian iron ore loaded for China totaled 2.1 MMT in August, a decline of 55% or 2.6 MMT YoY. With shipments averaging 3.8 MMT per month over the last year, this is the lowest monthly total for this trade since Q4 2019.
  • Indian iron ore to China has declined each month since March, in tandem with improved volumes coming out of Brazil. With China’s steel production slowing, mills in the country have prioritized higher grade ore from other sources such as Australia and Brazil.
  • An increase in domestic steel production in India, has seen more previously seaborne ore remain heading to domestic mills instead.
  • As volumes increased earlier this year, we have seen more Cape cargoes making the trip, however it is the Supramaxes that will likely be most affected by a slowdown in this flow, accounting for 81% of the shipments since the start of 2020. Our assessed BS12 Supramax route from EC India to Far East increased by 196% YoY to $40,000/day in early September.

Coup attempt in Guinea threatens bauxite traffic

  • A coup is reportedly underway in Guinea, and unverified videos show the country’s president being detained by soldiers. So far, we have not heard of any disruptions to operations at the country’s ports, but unrest presents a risk to Guinea’s booming bauxite export flows.
  • The country shipped a record 86.4 MMT of bauxite last year and was on track to surpass this figure this year. For the Capesize market specifically, these volumes have become extremely important. Cargoes are loaded relatively slowly offshore via transhipper and almost entirely bound for China, employing vessels for long periods of time.
  • Cape shipments of Guinean bauxite have grown from virtually nothing in 2015 to 64.1 MMT last year, although recently, a weak bauxite price and high freight rates have eroded shippers’ margins and slowed growth in this trade. This route directly accounted for 4.7% of total Capesize employment in 2020.
  • The FFA market was well offered this morning. At the time of writing the Cape October 2021 contract has sold off by $4,700 (11%) since last Friday, trading at $37,250.