By Eric Lerner
World steel production is contracting at a faster pace than in the Great Depression, according to new data released by the World Steel Association (http://www.worldsteel.org/pictures/newsfiles/1008_production%20figures.pdf). In October, following the financial crash, global steel production dropped by 6.8% as compared with September. To put this drop in context, in the year following the Crash of 1929, steel production fell on average by 1.7% a month and in 1931, following the banking crisis, production dropped an average of 3.0% per month. If the current rate of decline were to continue for a full year, steel production would drop by more than 50%.
While steel production no longer is a major employer in most industrialized countries, steel is vital to a large section of both manufacturing and construction, so its rapid contraction is a strong indicator of the drastic contraction of industry generally. The rate of contraction is a signal that the present Depression may develop even more rapidly than the one in the 1930’s, due to the tighter linkage of the global economy and the fact that this time, the crash in stocks and the banking crisis are simultaneous, not separated by 18 months, as in the earlier Depression.
The drastic fall in production in October is in fact an acceleration of a trend that began earlier in the year, as the financial storm was gathering force. World steel production hit a record level of 120 million tons per month in May and has contracted at an accelerating pace in every month since then, as shown in Table 1. Since May, the total contraction in production is 16.2%.
Month Rate of Contraction (% per month)
With steel giants like Accelor-Mittal announcing global production cuts of from 20 to 30%, this collapse of production will only continue to accelerate.
The decline, though global, is not uniform. This table gives the percentage decline in production from the peak earlier this year for the major steel producers. Spain alone managed an increase.
Country % decline in production
South Korea -5