UK steel production soars at start of 2011

Hopes for an industrial recovery in the UK steel industry will be buoyed today on the announcement that production bounced back in January on increased demand.

Production in the UK soared 35.4 per cent in January to 201,000 tons a week – compared with 148,574 in December, according to UK Steel figures that were to be released this morning.

UK Steel, a division of the manufacturers' organisation EEF, said this was reflected in "sharp increases" across the country's major steel-producing regions "as UK manufacturing continued to respond to increased demand". The British sector is dominated by Corus, owned by Tata of India.

Production in the Yorkshire and Humber area increased by 50 per cent to 89,200 tons a week, and Wales saw an increase of about one-fifth to 101,000. Ian Rodgers, director of UK Steel, said: "The uplift in January output was heartening and is a reflection of the continuing improvement in UK manufacturing output generally."

But he cautioned: "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."

The global steel industry was hit hard by the recession but recovered last year as output rose 15 per cent, the biggest full-year increase for more than 50 years, the World Steel Association said in January.

Yet UK output declined 3.7 per cent, the only country with Venezuela to see output fall in 2010. The boom earlier in the last decade was driven by demand in China, although that growth is slowing. Last year, China demand fell behind the rest of the world and the trend is expected to continue in 2011.

Earlier this month, metals giant ArcelorMittal talked up the prospects for a recovery in the global steel industry this year. The group revealed its steel production for 2010 had hit 85 million tons, more than one-fifth higher than the previous year.

Much of the UK's steel output still goes to the car industry and the revival in world trade, with a 20 per cent depreciation in sterling since 2008, has helped to push car exports and production much higher. The industry has also benefited from industrial re-stocking since the end of the recession. Like many basic industries, steel is also highly cyclical.