Global steel output dipped by 1.2% to 1,330 million tonne in 2008, after registering a long buoyant run that began in 2000. Though growth of steel output had slowed down in recent years after peaking at 10.2% in 2004, the growth has still hovered above a respectable 7% during the last three years.

So not only was this sudden fall largely unexpected, but it was also extensive. The only positive note was that steel output in the Bric nations as a whole continued to grow at 1.7%.

Annual figures show that only three of the top-9 steel producing countries could post a positive growth in output in 2008. In fact, the highest growth was posted by South Korea, the sixth largest steel producer, where the output grew by 3.8%. India, the fifth largest steel producer, was the next best performer, with its steel growth rate just a point lower at 3.7%. China, the top-ranked steel making nation, also managed a growth of 2.6%.

Among the major losers was Ukraine, the eighth largest steel producer, where output declined by as much as 13.4%. The other major countries where steel output fell in 2008 include the US (6.8%), Germany (5.6%), Russia (5.4%), Japan (1.2%) and Brazil (0.2%).

This puts the Bric nations at the opposite end of the spectrum. While China and India were among the major steel producing nations posting the highest growth of steel output in 2008, steel production in Russia fell by more than four times the global average. And Brazil lay midway, with steel production picking up a mite faster than the rest of the world. But the annual averages conceal more than they reveal as the slump in steel was mainly in the second half of the year. So the month-wise year-on-year growth figures provide a more accurate picture of the global scenario.

Monthly figures show that global steel production grew by more than 7% till June 2008 and then dropped to 3.3% in August. The first fall in global output was registered in September when output declined by 2.8%. The pace of decline has then accelerated over the next four months to touch 13.1% in October, 19.6% in November, 23.7% in December and 24% in January 2009. To get an indication of the magnitude of the fall in steel production, one should note that the 857 million tonne of steel produced in January 2009 was 271 million tonne lower than the output in January 2008.

Surprisingly, the steel output in the Bric countries seems to have avoided the global trends. The accelerated shrinkage in global steel production since September is, however, not noticed in the case of the Bric countries. The decline of steel output in Bric countries peaked in October 2008 when output fell by a high of 15%. The pace of decline has steady decelerated since then to touch a low of 6.9% in January 2009.

The slow improvement in the steel scenario in the Bric countries has been largely influenced by the trends in China. Monthly numbers show that the decline in steel output peaked at 16.4% in October 2008. But China has not only contained the shrinkage in steel production at the fag end of 2008, it has even reversed the trends with steel output picking up once again by 2.4% in January 2009. The turnaround was exceptional and no other major steel producing nation has been able to replicate it. Even India, which almost matched the Chinese growth performance in steel in 2008, could steer away from the global trends. Numbers, in fact, show that Indian steel output declined close to 5% in December 2008 and January 2009. The worst case scenario was in Russia and Brazil, where the pace of decline continues to accelerate with output falling by close to half in January 2009.

The January scenario continues to be equally bad in other steel producing countries like the US, Japan and South Korea. Between October 2008 and January 2009, the pace of shrinkage in steel output has gone up from 2.6% to 37.9% in the Japan, from 1.5% to 52.7% in the US and from a growth of 6.5% to a fall of 25.2% in South Korea.

The slowdown has hit the capacity utilisation in most countries across the globe and any delay in the rebound would only add to the problems as large steel capacities are being built in the emerging markets and in Bric countries. Globally the steel capacity addition in 2009 is expected to be 62 million tonne in 2009 and 134 million tonne in 2010.

The massive steel capacity additions announced in the Bric countries between 2006 and 2012 were: 679 million tonne in China, 155 million tonne in India, 72 million tonne in Brazil and 28 million tonne in Russia. Though many of these projects may now be delayed, even the small additions to the capacity could only further undermine the viability of the existing units.

?p.raghavan@expressindia.com