Restocking drives bounceback in UK steel production

Posted on 21 Feb 2011 by The Manufacturer

UK steel production in January bounced back strongly from the previous month but steelmakers say that restocking is responsible for much of the rise.

According to the latest data from UK Steel, a division of manufacturers’ organisation EEF, steel production in January was 35.4% higher than in December 2010 (201,152 tonnes a week compared to 148,574 tonnes).

There were sharp increases across the big steel producing regions. Production in the Yorkshire and Humber area increased by 50% (59,300 to 89,200 tonnes a week), while in Wales there was an increase of about one fifth (82,600 to 101,000 tonnes a week).

“The uplift in January output was heartening and is a reflection of the continuing improvement in UK manufacturing output generally,” says Ian Rodgers, director of UK Steel. “But we still have a long way to go to achieve pre-recession levels of steel output, with demand from the construction sector in particular remaining very weak.”

While the output gain is a fillip for a sector of manufacturing that faces big pressures including rising input prices, much of the January spike is due to restocking, say some members of UK Steel.

“It is quite normal for customers to run their inventories very low in December to tidy up their balance sheets for year-end,” a managing director at one steelmaker said. Speculative buying is also likely to account for some of the surge. “Commodity prices are rising and further rises are threatening, I think we’re seeing an element of hoarding,” said Nigel Lane, general manager at Cold Drawn Products. “How much of this is true demand is hard to say.”

Other steel companies, especially those making niche, specialised steels, support the figures. In August 2010 Vulcan SFM, makers of heavy castings for offshore oil and gas and part of Sheffield Forgemasters International Ltd, forecast an order book of £22m for the next 12 months. It has already broken that and has secured four new orders for a North Sea oil platform in January.

UK Steel will be publishing data on output on a bi-monthly basis.