China helped sure up metallurgical coal and iron ore demand in 2009 by increasing steel production 13.5% from 2008, while global steel output fell 8% to 1.22 billion tonnes, according to the World Steel Association.

Out of the top 10 steel-producing nations, India was the only other nation to increase output in 2009, by 2.7%, with the rest notching up considerable declines as the global financial crisis kicked in.

US production fell 36.4%, Japanese production sank 26.3%, Germany’s output fell 28.7%, Brazil shed 21.4% and Ukraine cut 20.2% last year.

China accounted for 47% of world steel production in 2009 compared to 38% in 2008.

The WSA figures for December revealed a marginal drop in global steel production compared to the previous month but, at 106.41 million tonnes, December was 6% below the 2009 peak in October.

China’s steel production reached 51.74Mt in October but fell 8.7% to 47.26Mt in November, only to be slightly up to 47.66Mt last month.

“The further drop in Chinese crude steel production – now down 9.1 per cent on an annualised basis since September – is undoubtedly a worrying data point,” Macquarie said in a commodities report.

“Steel-sector margins continue to be pressured by rising raw material costs, and with Chinese inventories and exports both rising, the effect on apparent steel demand is amplified.

“However, production of finished steel in China is still rising, while steel prices have risen 14 per cent over the past three months and raw material imports are still strong – all implying domestic demand cannot be as bad as the figures suggest.”

The analysts also cited a recent spot price of $US210 a tonne for seaborne hard coking coal from Australia in reinstating its bullish outlook for metallurgical coal.