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Steel industry comment and analysis

Prospects for the Steel Industry in the USA – ISSB perspective

Note – the passage below was written by the steel team at ISSB (Iron & Steel Statistics Bureau, UK) in January 2017.

It is fair to say that the past year has been one of changing fortunes for the global steel industry in general and for the US steel industry in particular. Although US demand for steel in the first half of the year was fairly subdued, a strong raft of anti-dumping legislation implemented in the latter part of 2015 meant domestic steelmakers enjoyed added protection. Crude steel production in the first half of 2016 was stable year on year compared with import levels which were 28% lower.
The subsequent increase in domestic steel prices once again led buyers to search out value from overseas sources resulting in Q3 import levels being substantially higher, although still 2% below Q3 the previous year, and domestic production falling by 4%. This trend continued into October with production down nearly 5% year on year but early indications show that the general election result may have helped to halt this decline.
The surprise election of Donald Trump could have a profound effect on the way that the US trades with the rest of the world. Trump appears to favour a more aggressive trade policy, regularly citing job losses as a result of imports from other countries, especially China. As the US is already agile in its application of anti-dumping legislation when necessary, it seems likely that US policy going forward will be geared even further towards protecting domestic interests.
The recent high profile case of Ford cancelling its proposed Mexican production plant in favour of one in the US after continued criticism from Trump along with the president-elect already suggesting taxes will be imposed on imported vehicles suggest in the short term at least that US demand for steel looks set to improve and given Trump’s rhetoric, this growth is very likely to be supplied by domestic producers.
The long term effect of these protectionist policies is rather more uncertain but in November, the month of the election, US steel production increased by over 6% year on year, the first growth since May. Going forward, the Australian Department of Industry is now predicting US steel production to grow by 6% this year and a further 13% in 2018 compared to the pre-election forecasts of 3% and 7% respectively.
It is just over a week before president-elect Donald Trump takes up his position in the White House and whilst the next five years are very likely to herald a much more protectionist stance to international trade for the US, aiding domestic steel producers in the short term, the long term consequence of this on the global steel industry and steel prices in particular is much more difficult to assess. In the short term imports are likely to be at reduced levels, adding to the quantities of surplus steel on the international market with the commensurate downward pressure on prices. Longer term trade restrictions are unlikely to lead to long-term prosperity with innovation and competitiveness on the global market likely to suffer.
For further information on this topic (particularly trade volumes) please visit ISSB or for other perspectives visit our steel industry news and information portal.

World steel prices

The Steelonthenet.com team has just updated their steel prices page. Average monthly world steel prices since January 2001 are now accessible online on their steel prices page and cover HRC, CRC, HDG, tinplate, organic coated sheet and steel rebar. The price data is fob export prices in US $ per metric tonne.

For further information visit http://www.steelonthenet.com/steel-prices.html.

 

SBQ Steel News

For the latest engineering steel news – SBQ steel news – see our special steels newsfeed at SBQ steel news.

The steel industry opportunity in Iran

Iran has been one of the fastest growing steel producing countries in the world over recent years. Crude steel production in the country increased by 65% over the past ten years and at 16.1M tonnes, Iran has become the fourteenth largest producer globally with by far the greatest output in the Middle East. This growth has continued so far in 2016 with production up nearly 10% in the first ten months of the year.

Part of the reason for this rapid development of their steel industry is likely to be the relative isolation the country has found itself over the years due to economic sanctions, along with a ready supply of iron ore which has enabled them to become relatively self-sufficient. With sanctions lifting this year, demand for steel in the country is likely to grow considerably in the coming years.
This isolation and growth in the domestic industry means that Iran imports relatively low quantities of steel which reduced from 12.7 million tonnes in 2007 to just 3.1 million tonnes in 2013. Since then, imports have risen slightly to just over 4 million tonnes each year and have remained relatively stable, although in the first nine months of this year they have grown by more than 20%. In a story that is familiar in many parts of the world, much of this growth has been in “alloy” HRC, plate and CRC from China.

Shipments from China have grown by 47% to 578K tonnes so far this year with the country representing the second largest source of steel with only the UAE shipping more. In actual fact though, a closer inspection of the shipments from UAE reveals that the bulk of this tonnage is likely originating from somewhere else with the UAE acting as an intermediary. A significant proportion of the increase in imports from the country appears to be the “alloy” flat products that Chinese producers export in order to qualify for tax rebates so it seems reasonable to assume that much of the 29% growth seen in imports from the UAE also originate in China.

The vast majority of production in the country is destined for the domestic market, although Iran does seem to be starting to export more. At its lowest level in 2012, they were exporting just 260 thousand tonnes of steel but since then this has been on the increase. In 2015 exports hit 3.8 million tonnes and have since grown even more so far this year. In the first nine months of 2016 alone, the country has exported 4.3 million tonnes, more than the whole of 2015 and representing a year on year growth of 41%.

The majority of this growth has come from increased shipments of ingots and semis with larger quantities of ingots being shipped to other Middle East nations; a growth of slabs being exported to Morocco, Brazil, Thailand and Taiwan, and a rise of other semis going to Oman, Thailand and Taiwan.

The Iranian steel industry is at an interesting point in its development. Since economic sanctions were lifted at the start of this year, the country is becoming increasingly “open to business” which should offer opportunities for overseas steel producers to exploit a new and growing market. Over a five year period ending in 2020, Iran is seen to be one of the fastest growing steel sheet markets in the world. The country’s steel sheet consumption growth is forecast to be more than double the world average over 2015-2020. Due to the relative strength and low-cost nature of Iranian steel producers, however, it seems likely that much of any growth may be taken up by domestic production and the only country so far that has managed to exploit the opportunity here to any great degree is predictably China.

Indeed, as Iranian steel producers become more outward looking, they may represent a threat in overseas markets although to date they have only really been active in the semi-finished steel markets but with shipments of slab to Thailand growing considerably it seems they have picked up some of the business that was being supplied by SSI in the UK.

 

Source of article above: ISSB.

For further info on the steel sector in Iran visit ISSB or check out our Middle East steel news page.

 

Trends in steel consumption

Consumption of steel products worldwide follows the trend of economic activity in individual countries. There is a clear trend for high levels of consumption of steel products at certain stages of economic development, which are associated with rapid urbanisation and construction, combined with industrialisation and the growth of manufacturing industry. The urbanisation and construction provide strong demand for steel long products (bars, heavy and light sections) and some flat products (plate and galvanised sheet for construction, including coated sheet), while the growth of manufacturing industry provides demand for flat products (hot- and cold-rolled coil, stainless steel, etc).

As more countries pass through this development phase, following on a smaller scale the path of China from the mid-1990’s onwards, steel demand will increase rapidly in some parts of the world.

The other clear long-term trend is that steel consumption stabilises or starts to fall in relation to GDP at high levels of income per head. This means that there will continue to be slow growth in steel consumption in the developed countries of North America, Western Europe and Japan.

For longer discussion of global steel industry trends [including technology trends, price cost trends etc] visit our world steel industry trends page.

Visit us on LinkedIn

Why not visit us at LinkedIn? Our parent company Metals Consulting International Limited has its own LinkedIn page at https://www.linkedin.com/company/metals-consulting-international-limited/ where you will find consulting case studies, steel news reports and other information about us.

Steel price outlook 2015

Our economists have been considering the steel price outlook for 2015. We have deliberated on this by considering the likely change in world steel capacity utilisation between 2014 and 2015.

Global steel demand [thus production] is likely to increase at crude steel level by ~40mt in 2015 (according to worldsteel).

Global steel capacity is likely to increase by ~60mt in 2015 (according to OECD).

On this basis, we calculate that global capacity utilisation will fall very slightly in 2015, from 76.3% to 76.1%.

Thus, we predict that steel prices in 2015 will be very close to (or fractionally below) average 2014 price levels.

Decline of steelmaking in the UK

The decline of UK steelmaking continues.

According to a press report published today, the Tata steelworks in Port Talbot is set to shed 400 jobs, with chief executive Karl Koehler saying the moves are necessary for the company to remain competitive.

High business rates and rising energy costs were cited as reasons for the job losses.

“Steel demand and prices are likely to be under pressure for some years. Our business rates in the UK are much higher than other EU countries’ and our UK energy costs will remain uncompetitive until new mitigation measures come into effect”, said Koehler.

A 45-day consultation period will begin shortly. This is not the first time the Tata boss has warned about the consequences of high energy costs. In January, Koehler urged the government to slash energy bills.

For original press report, visit http://www.cityam.com/1404212347/tata-steelworks-cuts-400-jobs-due-uncompetitive-energy-costs 

Strategic planning process at ThyssenKrupp

The press have just reported the completion by ArcelorMittal / Nippon Steel & Sumitomo Metal Corporation of the purchase of ThyssenKrupp’s North American Calvert plant. For full report, visit http://uk.finance.yahoo.com/news/arcelormittal-completes-acquisition-thyssenkrupp-steel-211100386.html.

This Calvert plant comprised a state-of-the-art hot strip mill with tandem cold rolling and further coating capability and some 4.3 million tonnes of installed capacity, and was commissioned around November 2007. The facility apparently cost $5 billion to set up, and was reportedly sold for $1.55 billion.

Now – what does this episode tell us about the quality of strategic thinking at ThyssenKrupp? I ask this question, because as a steel industry adviser I am forever being asked to comment on upside and downside scenarios. We do of course also live in a world where the number of tools available for a risk assessment is greater than ever before. The question thus arises: how did ThyssenKrupp’s management allow this disaster to happen?

Were the management of ThyssenKrupp so sure of their own views that they did not want to listen to any cautionary voices? Do ThyssenKrupp not like using external consultants? Is the German model of corporate governance perhaps suboptimal is some rather fundamental way?

This episode should not only teach managements a lot about how to properly manage large investment decisions, but perhaps also remind us all about the value of independent external perspective.

Dr Andrzej M Kotas
Managing Director
Metals Consulting International Limited

Steel demand forecast

Did you know that we help clients with steel demand forecasts? And with steel price forecasting?

If you are interested in steel consumption today / tomorrow for any steel product or in the likely evolution of steel prices in any particular steel product niche, contact us at http://www.steelonthenet.com/statistics.html

Dr Andrzej M Kotas

http://www.steelonthenet.com

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