Global output of steel, a gauge of economic health, jumped 5 percent in April, extending a surge seen in the first quarter, industry data showed on Tuesday. The data pointed to a rebound in demand but also prompted concerns about oversupply.

Producers in the world's second largest industry after oil churned out 142 million tons of crude steel in April versus 135 million tons a year ago, according to the World Steel Association (Worldsteel).

Output in China, which accounts for half of global steel production and a quarter of global steel exports, rose 4.9 percent to 72.8 million tons, said Worldsteel, whose members jointly account for 85 percent of global steel production.

"The data (does) indicate steel demand is improving globally after the downturn, but in Europe we've seen price sentiment weaken quite a lot, in the U.S. its a bit mixed and our contacts are expecting Chinese demand to soften, so there is potential for supply to start outweighing demand," said Jeremy Platt, analyst at UK-based steel consultancy MEPS.

In January-March global steel production rose 5.7 percent from a year earlier. Platt said that while steel prices could fall as a result of rising production, they will not sink near the 12-year lows hit in December 2015.

Still, industry participants are nervous given the troubles Chinese authorities are having in trimming down bloated, smokestack industries like steel, as output continues to surge despite moves to cut back excess capacity.

China, which accounts for nearly half the 760 million tons of spare global capacity, is well on its way to meeting a target to slash 50 million tons of capacity this year, on top of the 65 million tons cut last year.

But many of the plants closed last year were already idled, hence the limited impact of the closures on steel production.

 

Source:reuters.com

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