There have been enough upward blips in the steel industry data to make headline writers giddy. Metal Bulletin offered, (so tentatively that it scarcely qualifies), “12 indicators which we believe are important enough to point in the direction of an easing in the recession.” And as posted here, the World Steel Association crude steel production report showed a bounce in May over April of over 7% with Chinese production particularly robust. Likewise, the AISI’s US weekly production data has shown an improvement in crude steel capacity utilization even though the chart below shows how slight this is.

In addition to the output data, prices seem to have passed the bottom, raw material prices are rising and some US mills are attempting their own price increases in response. Some consuming markets promise signs of life. The passage of the “Cash for Clunkers” bill is expected to boost automotive sales by about 250K units before the end of the year. Finally new home construction made a 17% gain in May after the record low in April.

But there are (at least) two troubling aspects to speculation about the end of the recession. It’s likely wrong. It’s largely irrelevant, especially to corporate strategies.

First, there are still plenty of contradictory data as to whether the recession is over (see today’s Wall Street Journal). Recently the Financial Times’ Martin Wolf drew attention to the work of two economists who have been making a monthly comparison of this recession with that of the Great Depression. Economists Eichengreen and O’Rourke compare the two economic downturns by their impact on industrial production, trade and stock valuations. Their most recent observations from early June are here. Their data don’t provide much encouragement.

On the three measures of industrial output, trade and stock market valuations the current recession after 12 months is no better than or (in the case of trade and stock markets) is worse than the Great Depression at a similar point. And as they point out, on a regional basis:

The North Americans (US & Canada) continue to see their industrial output fall approximately in line with what happened in the 1929 crisis, with no clear signs of a turn around.

It should be remembered that while US steel production in the Great Depression declined 28% in 1930, it fell another 36% and 47% in 1931 and 1932. Capacity utilization in 1930 was 62%, but fell to 38% in 1931 and then to 20% in 1932. So the start of the Great Depression was by no means the worst part.

The important difference between our current recession and The Great Depression is a very different policy response from governments modelled on the perceived mistakes of the 1930’s. In other words, we have to hope that what governments around the world have done will be sufficient to prevent a multi-year event of the depth of the Great Depression by bridging the gap until private investment and consumer demand revive.

But there’s not much comfort that important steel industry markets will return soon. The automotive and construction industries, the two most critical to the steel industry’s overall health, are not forecast to reach pre-recessionary activity levels in North America until 2013 or beyond. The impact of this prolonged and sluggish return to anything like recent demand levels will put pressure on (meaning it could close) about 20MT of existing North American steel making capacity.

Besides all this contrary data, any joy around the technical end of the recession must be short lived and useless. It wouldn’t be long before we suspected any kind of recovery of being hollow with a resulting dampening effect on its impact.

The exact end of the recession is irrelevant. We know enough. The environment for North American steel businesses is going to be difficult for some time to come. It took us a good while to get into this mess and it will take a good while to get out. We can already envisage the range of scenarios in recovered and non-recovered economies that we could face in future and that we need to build strategies for.

So far this year the US is 5% of global steel production. China is 50%. US demand is likely to be significantly less than 10% of global demand for the foreseeable future. China’s demand looks like it will persist and even grow. The slope of the recovery curve and the position of the US in the world industry mean that corporate strategies – in ways that they have not hitherto – need to focus on the world market and world opportunities if North American companies are to play the role they should in the world industry. Making progress on those strategies shouldn’t be tied to the end of the recession. They need to be built out of it.

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Cut plate, hot roll, cold roll, and hot dip galvanized imports all declined but most significantly cold roll imports dropped 43% to 63,000 tons and hot dip galvanized imports dropped 26% to 86,000 tons. Cold roll imports declined from Brazil, Belgium, Russia and Australia. Hot Dip galvanized imports declined from India, Mexico, and Australia but increased from Korea and China.

Licenses recorded up to June 16th were 127,000 tons which implies that full-month June imports will be lower than May’s.

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The most significant changes by product category were a rise in rebar imports from 31,000 tons in April to 48,000 tons in May, and a decline in all other structural shapes imports from 11,000 tons in April to 6,000 tons in May. Licenses reported up to 16 June (42,000 tons) imply that June import levels will stay under 100,000 tons.

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As a result, apparent finished steel consumption in China reached 44.9 million tonnes, its highest level ever recorded, compared to 41.9 million tonnes in April.

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You may have noticed from our spreadsheet that import licenses have not predicted actual imports very accurately in February and March. This was due to rebar licenses, which were much higher than actual imports in February and much lower in March. February licenses were high because they were revised downward by 28,000 tons after our mid-March data collection date. March licenses were low because Turkey imported about 80,000 tons of rebar but applied for only 48,000 tons of licenses. Feel free to comment if you can explain this.

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Finished steel exports continued their decline from 1.67 million tonnes in March to 1.41 million tonnes in April, a 16% drop. Finished steel imports rose to 1.62 million tonnes, resulting in net finished imports of 210,000 tonnes.

Finished steel production was 3% lower in April at 41.66 million tonnes.

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Cut plate licenses declined significantly from Canada and Japan, while they climbed from Sweden and Germany. Hot roll import licenses dropped significantly from Canada, but also from Mexico and Finland. And finally, Australia, Canada and China were important contributors to the decline in hot dip galvanized imports.

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