Chart of the day is....

...Brazilian steel consumption, 2008 and 2009 forecast.

According to this report in BNAmericas, the head honcho at the IBS Brazil steel institute says that even in the most optimistic of situations and a 5% GDP growth from 2010, steel consumption won't return to the 2008 level until 2011. The same dudes are also forecasting a 14% world slump in steel this year and a large supply glut.

By the way, I thought about using the US bonds yield curve as chart of the day today, but you're probably bored or scared to death by it already so let's not bother.

LatAm's steel production figures underline the regionwide recession

This BN Americas report tells a sorry tale of pan-regional slowdown in steelmaking activity. Here's the chart.

According to ILAFA (the respected LatAm steel people) crude steel output dropped by a regional aggregate of 40% to 10.1 million metric tonnes (MMT). Brazil (5MMT) and Mexico (2.4MMT) are the big players in the sector and between them made up 7.4MMT of that reduced total. Third place now taken by Venezuela at 1.06MMT. Argentina is now fourth, dropping from 1.37MMT to 798,000MT in the quarter.

FWIW, primary iron and hot rolled productions are just as nasty. Check that link to find out.

As for that Venezuelan production hike, it's interesting that steel production went up but that doesn't necessarily mean they found someone to buy it. However it is a graphic illustration of a the difference in economic model used by Hugolandia. But Venezuela aside, steel prodution numbers over the whole region really ram home the fact that no country escapes this mess. Somebody tell that dumbass Carranza, please.

Vale (RIO): Very shortable here

I'm now looking for the right price to short RIO. Fundamentals suck (Inco in bad shape and more layoffs at an office admin level announced this week) and recent news out of China strongly suggests that the recent pickup in steel production is a forced governmental move that has no basis in true demand, thus causing ever greater stockpiling of finished product.

Sorry brazilguys, I know your RIO is big and meaty and I know you've already dropped a long way, but there's plenty of reason to see RIO as a major hedge play to balance longer stuff.

Here's Reuters with a short report to whack home the issue:

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BEIJING (Reuters) - China's crude steel output was 1.42 million tonnes a day in February, equivalent to about 520 million tonnes a year and a "worrying oversupply", Deng Qilin, chairman of the China Iron & Steel Association, said on Friday.

According to a Reuters calculation, that means February output totalled 39.76 million tonnes, a 5.2 percent increase on the 37.79 million tonnes produced in December 2008, a longer month and the last month for which data is available.

Deng, who is also president of Wuhan Iron & Steel Group, said his company would cut output by 15-20 percent and aimed for sales of 120 billion yuan ($17.55 billion) this year. ($1=6.839 Yuan)

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UPDATE: Not short yet, will look for $13 on Monday

Demagogue

Alan launches into Nirvana's Lithium at a local Karaoke bar

President Twobreakfasts was on Peru radio today. His message was "Businesses have no material reason to lay off workers or reduce investments" and similar demagogic guff and nonsense about "the fear factor".

Nice timing, as Peru's biggest steelmaker 'Aceros Arequipa' today announced it was suspending production "for maintenance purposes", but customers shouldn't worry because they had enough stock to continue to meet demand. (UPDATE: here's Reuters English language on the story). Or in other words the 40% drop in demand for steel products (especially re-bar used in construction) means the market is now way oversupplied. Note that October stats showed a 14% increase YoY in construction activity in Peru.....go on, take a wild guess about next year's figures...

Acero Arequipa's maintenance program has suddenly been brought forward from 2010, but don't worry. All is well. I mean, just one month ago Alan himself said that Peru was totally protected from any economic crisis. Isn't the word of your President good enough these days?