UPDATE 2-Global steel output up in July on US, Chinese increases

Tue Aug 20, 2013 11:49am EDT

* Global July output 132 mln T, up 2.7 pct from July 2012

* Chinese output 65.5 mln T in July, up 6.2 pct on year

* EU output down 6 pct year-on-year in July

* Iranian production up 16 pct

LONDON, Aug 20 (Reuters) - Global crude steel production rose in July as a recent price upturn helped boost output in top producer China and in the United States, while suffering European steelmakers continued to curb volumes.

World production rose 2.7 percent to 132 million tonnes in July from the same month a year ago, figures from industry body the World Steel Association showed on Tuesday.

A recent rise in steel prices has encouraged an increase in production, even while overcapacity continues to afflict the sector.

China, which produces half of the world's steel supply and is also its top consumer, posted a 6.2 percent increase in output to 65.5 million tonnes and helped drive Asian production almost 5 percent higher.

"Chinese output remains high," said Jeremy Platt, an analyst at steel consultancy Meps.

"Scheduled maintenance and environmental programmes have had limited impact, and price rises usually encourage Chinese mills to increase output. Oversupply pressures remain."

Speeches made by high-ranking officials recently indicate that China's cabinet is considering deeper structural reforms to bloated, inefficient and debt-laden sectors such as steel.

Market players say, however, it will take a long time before such reforms will be effective in cutting China's surplus capacity, estimated at around 300 million tonnes, or the equivalent to nearly twice the output of the European Union last year.

Elsewhere in Asia, output in Japan, the world's third-largest producer, increased 0.5 percent in July from the same month a year before to 9.3 million tonnes, the data showed.

India, another major Asian producer posted 4.3 percent growth in steel output in July to 6.7 million tonnes, while South Korea registered a 5.8 percent contraction year-on-year to 5.6 million.

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The United States, another large producer, registered a 3.3 percent output increase in July to 7.6 million tonnes.

Improved demand and rising steel prices have encouraged producers to boost output after a contraction in the first six months of this year.

Production in the European Union shrank by 6 percent to 13.4 million tonnes, with output contracting at the region's top producers Germany and Italy by 5.4 percent and 8.5 percent, respectively.

Steelmakers in Europe have been hit harder than those in other regions by a weak economy, higher costs and excess supply.

"Crude steel production discipline seems to be getting better in the EU, moving in line with the demand outlook," said Kashaan Kamal, a research analyst at brokerage Sucden Financial.

"Although overcapacity is still an issue in the region, economic indicators are pointing towards a gradual recovery."

Steel production in the CIS (Commonwealth of Independent States) was down 0.2 percent to 9.2 million tonnes in July from a year ago.

Output in Turkey, a major supplier to the Mediterranean and the Middle East, fell by more than 10 percent to 2.8 million in July, curtailed by strike action at one of its main producers.

Iran posted production growth of 16.1 percent to 1.3 million tonnes. The Islamic Republic has vowed to boost domestic steel production and is targeting self-sufficiency after imports dropped dramatically due to western trade sanctions.