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After a Lull in January 2015, China’s Steel Production Rises

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Mar. 27 2015, Updated 9:05 a.m. ET

China’s steel production

In Part 2, we saw that global steel production increased 0.6% in February on a year-over-year (or YoY) basis. In this part, we will look at the latest steel production figures in China.

China is the world’s largest steel producer and consumer, accounting for almost half of global steel consumption. The iShares China Large-Cap ETF (FXI) gives you exposure to Chinese equity markets.

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Steel production rises

The above chart shows the trends in China’s steel production. In February 2015, steel production in China increased 3.4% on a YoY basis after decreasing 4.7% in January. So far this year, the trend in China’s steel production has been uneven. However, looking at the first two months, steel production is down 1.5% on a YoY basis.

China has been producing steel in excess of its domestic demand for several years. Steel exports from China have reached record highs as a result of this overproduction, making China the world’s biggest steel exporter.

Steel companies across the globe are crying foul over steel imports from China. Later this month, several top executives of US steel companies will testify at a Congressional hearing, pleading their case against steel imports. Executives from US Steel (X), ArcelorMittal (MT), and Nucor (NUE) will present their cases at this hearing. Nucor and Steel Dynamics (STLD) each form ~3.7% of the SPDR S&P Metals and Mining ETF (XME).

Negative signs

Increased China’s steel production is a negative sign for the global steel industry. Steel production has increased in China, while the demand indicators of its domestic steel industry have only worsened since last year. In the next part, we will discuss the indicators of China’s steel demand.

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