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Global Steel Output Down 2.1%

The decline came entirely from a drop in Chinese production, which fell 5.6%.

Global steel production fell 2.1% to 3.58 million tonnes per day (mtpd) in November from 3.66 mtpd in October. The decline came entirely from a drop in Chinese production, which fell 5.6% to 1.58 mtpd in November.

While Chinese mills had repeatedly ignored attempts by the Chinese government to rein in production, we believe higher raw material costs and rising inventories finally forced steelmakers to cut output. Chinese production is still high-- only 7% below September's record -- and we hope to see further production cuts moving forward to bring the production/consumption ratio more in balance.

November production outside China remained relatively flat, with the Middle East down 5.2%, Asia (excluding China) down 1.2%, Europe outside the EU-27 down 3.9%, and South America down 0.7%. Production rose by 2.5% in the EU-27, 2.4% in North America, and 0.9% in Africa. Total steel production for the month fell 5.2% sequentially to 107.5 million tonnes due to one less day in November.

We expect to see further reduction in December as many Chinese mills suspend production for routine maintenance. However, we remain concerned that Chinese mills will continue to favor increasing exports over cutting production; November steel exports rose 6% to 2.87 mt and are 115% higher than the lows in May.

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Michelle Galanter Applebaum spent more than 20 years as a managing director at Salomon Brothers in New York and was the No. 1-rated steel analyst from 1988-2003, according to Institutional Investor magazine. In 2003, Ms. Applebaum formed Steel Market Intelligence, a 5-person Chicago-based equity research boutique providing advisory services to institutional investors. In addition to publishing 10-15 reports/week, Ms. Applebaum sponsors numerous CEO-level meetings for her investor clients during the year. She is regularly quoted on Bloomberg, Dow Jones, The New York Times and makes frequent appearances on CNBC and other news programs. Ms. Applebaum lives near Chicago with her husband, visiting children and 2 dogs.