Day: 16 April 2021

Chinese official economic data for the first quarter shows crude steel output has remained very strong despite attempts to curb production levels in Tangshan. This has been driven by the strong recovery in end user demand, which gained over 50% year-on-year in Q1, Kallanish calculates.

Chinese crude steel output in March was up 19.1% y-o-y to 94.02 million tonnes, according to the National Bureau of Statistics (NBS). This brought output over the quarter to 271.04mt, up 15.6% y-o-y.

Q1 2020 saw output constrained by the Covid-19 lockdown, but March data was also the second highest on record after August 2020. Mills were producing crude steel at an annualised rate of 1.107 billion tonnes/year. This shows steelmakers operating as close to capacity as they can, while margins have been strong.

As noted in last month’s Kallanish China Steel Intelligence, China does not yet have the policies in place to engineer a y-o-y decline in steel output.

China’s trade balance meanwhile moved in the direction of exports in March despite higher steel imports. This was in part because exporters were rushing through cargoes ahead of an anticipated change in export tax rebates. Accounting for this, China’s apparent finished steel demand was up 19.81% in March at 84.1mt, and up 15.36% over the quarter at 246.14mt.

The biggest difference between Q1 2020 and 2021 however has been in end user demand. Accounting for inventory change, implied end user demand in March was up 30.01% to 89.79mt, but over the first quarter demand was up 51.61% at 196.28mt. The increase over the quarter equates to roughly the one month of demand lost due to the lockdown in 2020.

On a daily basis, demand in March recovered both on-year and from the winter, but is in fact still slightly below the average for the second half of 2020. As the weak basis for comparison fades after Q1, China’s output and demand growth rates will also slow sharply, and could turn negative by the end of the year.

Turkish mills’ cold-rolled coil exports rose significantly year on year in the first two months of 2021 on higher European demand, especially southern Europe, amid availability issues in the region, S&P Global Platts observed from the latest data from the Turkish Statistical Institute (TUIK).

Turkish mills’ shipped 133,500 mt of CRC to global markets in the period, tripled year on year, although Turkey’s overall CRC exports totaled only 379,600 mt in all of 2020, amid trade barriers and the COVID-19 pandemic.

South European countries were Turkey’s top CRC export markets in January-February 2021. Italy imported 36,200 mt of CRC from Turkey in that period, sharply higher than the 2,500 mt shipped to the country in the same period the previous year.

Spain was at 22,500 mt, up fivefold on year, while Turkish mills’ CRC shipments to Belgium totaled 8,200 mt. Turkish mills’ also exported 6,800 mt of CRC to UK in that period.

Ongoing availability problems in the market, strong export demand and higher HRC pricing, pulled up Turkish mills’ CRC offer prices to as high as $1,250/mt ex-works and above in recent days, while mills’ HRC offer prices have exceeded $1,000 mt ex-works.

Demand in the domestic market, however, has slowed notably following these hikes, amid sharply depreciated Turkish Lira against the US dollar since March 20, following the dismissal of the Central Bank’s governor.

The bank’s Monetary Policy Committee (MPC) has decided to keep the policy rate (one-week repo auction rate) constant at 19% at a meeting held April 15 with the participation of the bank’s new governor, Sahap Kavcioglu.

Highlighting that demand and cost factors, supply constraints in some sectors, and high levels of inflation expectations continue to pose risks to the pricing behavior and inflation outlook, the bank stated: “The decelerating impact of the current monetary stance on credit and domestic demand is envisaged to become more significant in the upcoming period. Accordingly, the MPC has decided to maintain the tight monetary policy stance by keeping the policy rate unchanged,”

The currencies remained largely stable following the decision at Lira 8.08-8.12/$1 on April 15.

— Cenk Can

The World Steel Association forecast April 15 that steel demand will grow by 5.8% in 2021 to reach 1.874 billion mt, after declining by just 0.2% in 2020, as the overall impact of the coronavirus pandemic on the sector turned out to be less than previously foreseen.

In 2022, steel demand will see further growth of 2.7% to reach 1.925 billion mt, said worldsteel, which represents around 85% of global steel production.

The recovery has been largely led by China, which produces more than half the world’s crude steel. China’s steel demand grew 9.1% on year in 2020, but is expected to slow to a 3% growth rate this year and 1% in 2022, as the effect of the 2020 stimulus subsides.

In the rest of the world demand plunged 10% last year and continues to lag in advanced economies, said Al Remeithi, chairman of the worldsteel economics committee, in a short-range outlook statement. The pandemic continues to cause considerable uncertainty for the rest of 2021, he said.

“In these advanced economies, steel demand in 2022 will still fall short of 2019 levels,” Remeithi said. “In the coming years, steel demand will recover firmly, both in the developed and developing economies, supported by pent-up demand and governments’ recovery programmes. However, for most developed economies a return to the pre-pandemic levels of steel demand will take a few years.”

Quicker than expected rebound

Overall, however, the sector’s rebound from the impact of production stoppages and lockdowns during COVID-19 “has been greater and sooner than initially expected,” worldsteel Director General Edwin Basson said on a call with reporters.

The new short-range outlook revises up the worldsteel’s forecast in October 2020, which foresaw a 2.4% demand decline in 2020 and a 4.1% recovery this year to 1.795 billion mt.

The new forecast assumes that the ongoing second or third waves of COVID-19 infections will stabilize in Q2 and that steady progress on vaccinations will be made, allowing a gradual return to normality in major steel-using countries, worldsteel noted.

China expectations

China’s economy quickly rebounded from the lockdown in late February 2020, and its overall economic activity has been largely unaffected by the pandemic, unlike the rest of the world, according to worldsteel. China’s GDP growth of 2.3% in 2020 may accelerate to 7.5% this year, before moderating to 5.5% in 2022, the association said.

Work on new Chinese infrastructure projects continues apace following post-COVID stimulus, supporting steel, although for 2021 and onwards, real estate investment growth may decrease due to the government’s guidance to slow growth in the sector down, and to focus on more sustainable growth worldsteel said. China’s automotive sector – typically the second biggest steel consuming area after construction – reduced production by only 1.4% in 2020, it said.

“China is beginning to stabilize,” Basson said, referring to China’s intention that its economy should in future be driven more by consumer rather than investment demand. “There are strong signals from the Chinese government the market is at the level it should be. But even if China grows 2%-3% this still has a huge impact on steel demand.”

No overall change is currently foreseen in China’s role in the global steel industry, nor in typical global steel trade levels of around 400 million mt annually, he said.

Developed world

The developed world’s steel demand recorded a double-digit decline of 12.7% in 2020, worldsteel said.

“We will see substantial recovery in 2021 and 2022, with growth of 8.2% and 4.2% respectively. However, steel demand in 2022 will still fall short of 2019 levels,” the association said.

In the US, where a major infrastructure budget will be considered by Congress, steel demand recovery will be constrained in the short term by a weak rebound in the non-residential construction and energy sectors. The automotive sector is expected to recover strongly.

In the EU, recovery in 2021 and 2022 is expected to be healthy, driven by recovery in all steel-using sectors, especially automotive, and public construction initiatives. “So far, the EU’s recovery momentum has not been derailed by the ongoing third waves, but it remains fragile,” worldsteel said.

Japan, where the pandemic dealt a severe blow to the economy, will see only a moderate recovery in steel demand this year

Developing nations

Steel demand in the developing economies excluding China declined by 7.8% in 2020. Worldsteel expects these economies, including in India, MENA, Latin America, ASEAN, Turkey and Russia to show a relatively quick rebound in 2021 and 2022, with growth of 10.2% and 5.2% respectively. Accumulation of debts, no recovery in international tourism, and slow vaccination will prevent a faster recovery, it said.

Sectors

Global construction – the biggest steel-consuming sector – is expected to reach its 2019 level again in 2022, worldsteel predicts. This follows a 3.9% fall of global construction output in 2020, a substantially bigger fall than the 1.9% recorded in 2009 after the global financial crisis, it said.

Globally, automotive saw the most profound decline among steel-using sectors, typically on a double-digit scale, worldsteel said. However, the automotive sector is expected to recover strongly in 2021, due in part to pent-up demand, particularly in the US. The global automotive industry should also return to its 2019 level in 2022, it said.

— Diana Kinch

Higher steel prices and iron ore pellet demand since the fourth quarter followed stronger steel orders and consumption in developed economies, leading the World Steel Association to increase its 2021 steel demand estimates on April 15.

Steel-related industries rebounded quickly in Q3 2020, largely due to substantial fiscal stimulus measures and the unleashing of pent-up steel demand, leading to stronger demand forecasts.

Lead times at steel mills in Europe are stretching into Q3, with steel sales bookings at record prices, and that is supporting high-grade steel raw materials to maximize steel production, a senior steel group executive said.

Developed economies are now expected to see steel demand grow 8.2% to 371 million mt in 2021, worldsteel said in its latest Short Range Outlook report.

Even with the upgrade from a 363.5 million mt estimate for 2021 in the October SRO and further growth in 2022 to 386.4 million mt, developed steel demand would fall short of the 393.4 million mt in 2019, Worldsteel said.

Worldsteel acknowledged the ongoing pandemic effect on the global economy, with disruptions from waves of infections expected to fade.

Industry activity levels below the pre-pandemic level at the end of 2020 may improve, and eventually return to pre-pandemic growth after 2022.

Steel demand may be stronger still if raw materials supply improves to boost steel production and shipments. Some bottlenecks to steel capacity are easing, but with maintenance schedules and restart preparations.

MENA recovery

Worldsteel upgraded steel demand in the Middle East and North Africa region, which includes multiple DRI modules needing pellets.

A rise in oil prices helped the region’s steel demand to recover toward the end of 2020 and it was expected to “recover moderately with the resumption of infrastructure investments”, worldsteel said.

China’s steel demand is now expected to exceed 1.02 billion mt in 2021, up from the group’s 980 million mt October forecast.

Higher pellet demand has led premiums and prices to surge for Q2 from record low premiums in 2020. A shortfall of pellets is leading DR pellet plants to seek blast furnace grade and poorer quality substitutes, paying up to run operations at stable rates.

A March 31 fire at Rio Tinto’s Iron Ore Company of Canada was expected to disrupt iron ore pellet and high grade concentrate loadings and supplies available in Q2, with potential for a catch-up to shipments in the second half, market sources said.

Concerns around iron ore supplies and pellet feed qualities remain after Vale produced less pellets than estimated in 2020, forcing some plants to use more lump and lower-grade pellets at DRI plants as the market awaits Vale’s return toward pellet capacity.

Higher carbon permit prices have been supporting demand for pellets, in some cases in Europe to ensure surplus carbon requirements over free carbon allowances are minimized, and to meet sustainability and emissions reduction targets.

Met coke plants may be slow to ramp up, with stronger yields and coke qualities needed to boost steel utilization rates, according to industry sources.

Worldsteel’s latest forecasts, published in the semi-annual SRO, assumed the waves of COVID-19 infections will stabilize in Q2, and vaccinations will allow a gradual return to normality in major steel-using countries.

— Hector Forster

Importers of coil in Europe are reported to be in a wait-and-see mood this week as offers from suppliers are scarce and still expensive, but uncertainty is mounting over the third and fourth quarters.

Traders report that Indian hot rolled coil suppliers were active a few weeks ago with offers as high as €860/tonne ($1,029) cfr southern Europe, but this week offers have faded. Uncertainty related to Indian supply is mostly based on the possible confirmation of EU safeguard measures after June this year.

One trader reports Turkish HRC offers this week at €870/t cfr Italy, to which duties need to be added. Interesting offers are also being received from Asian suppliers in Indonesia, Taiwan and Vietnam at some €900-920/t cfr southern Europe.

“Buyers are cautious this week, as new orders will be delivered in Q3, and many fear the market will have turned by then,” the trader comments. “I personally believe Turkish offers remain the most interesting as duties are already known and could eventually only be reduced from the provisional measures in place; Indian suppliers, on the other hand, will always have the problem of safeguard measures.”

Meanwhile, some competitive hot-dip galvanized coil offers have also been heard from Turkey, Kallanish understands.

Emanuele Norsa Italy

The automotive sector saw the most profound demand decline among steel-using sectors in 2020, with a nosedive in the second quarter. However, it is expected to recover strongly in 2021, worldsteel says in its April short-range outlook (SRO).

“The recovery will be driven by pent-up demand, increased use of personal transportation due to safety concerns, and increased household cash savings,” worldsteel says. “The recovery is expected to be particularly strong in the US, where the production level in 2021 will exceed the 2019 level and the global automotive industry is expected to recover in 2022.”

“Despite a faster-than-expected recovery in demand, the sector is encountering another supply chain bottleneck in early 2021 with a shortage of semiconductors and other parts, which could constrain the recovery potential,” worldsteel director general Edwin Basson saidduring Thursday’s SRO presentation attended by Kallanish.

Amid the crisis, 2020 saw a substantial increase in the share of hybrid and fully electric cars sales in the EU, by 11.9% and 10.5% respectively, up from 5.7% and 3% growth in 2019.

Global construction output in 2020 fell by more than in 2009, when it was hit by the global financial crisis, by 3.9% and 1.9% respectively, worldsteel says.

Across countries, the most severe decline in construction was observed in the Philippines, India and Mexico. In China, the construction sector returned to normal operation at the end of April and has been showing a fast recovery since.

“However, infrastructure projects have become important and are sometimes the only tool in many countries for economic recovery and they will continue to be a strong driver in emerging economies,” the association observes.

In developed economies, green recovery programmes and infrastructure renewal will drive construction demand, which is expected to reach 2019 levels again in 2022.

Svetoslav Abrossimov Bulgaria

Van Leeuwen Pipe and Tube Group achieved a positive result in 2020, despite the extraordinary overall circumstances, and is upbeat about the current year, Kallanish learns from the Dutch tube distributor.

Results were affected by the Covid-19 pandemic, but the company benefited from the scale it gained with Benteler Distribution, which was acquired at the end of 2019. This doubled the size of Van Leeuwen. Total 2020 sales amounted to €1.18 billion ($1.4 billion) versus €787 million in 2019. The operating result was €15m, down from €17m, while the net result amounted to €9.4m, after €10.1m in 2019.

At the end of the third quarter, customers in various market segments restarted production and this pushed up volumes, giving the company a positive outlook for 2021. There is an upward trend in price levels and market activities are picking up again, it says, noting that its European distribution companies, in particular, are enjoying strong orders.

The group has 78 branches with 2,400 employees spread across 33 countries throughout Europe, the Middle East, Asia, Australia, and North America.

Christian Koehl Germany

Acerinox projects production and net sales to improve in 2021, says company president Rafael Miranda. He was speaking during a conference ahead of the Spanish stainless steel producer’s annual general meeting held on 15 April, Kallanish reports.

“We see light at the end of the tunnel,” Miranda says. “We believe 2021 will be a year of recovery for the company and the first-quarter results show that. Now we have three-month visibility in the order books which we did not have in the last four years.”

The steelmaker’s Q1 production grew by 8% on-year due to the 80% increase in order books during the period. The company estimates that its special alloys subsidiary, VDM, will report 20% of the group’s Ebitda in the coming years.

The steel sector is awaiting the reopening of main markets after the second wave of Covid-19 and recovery in consumption. The situation, however, could result in further inflation.

Acerinox does not expect big changes at its North American unit, which represents almost 45% of the group’s total business, under the new US President Joe Biden administration.

Miranda says the US economy is recovering faster thanks to huge stimuli, including a recently agreed infrastructure plan. Acerinox “will surely be present”, he says of the expected US activity. The only negative effect could be the announced rise in corporation tax, he adds.

“We have done well with both democrats and republicans because they are all pro-industry,” Acerinox executive director Bernardo Velázquez comments. “We believe that President Biden is not going to distance himself much from what Donald Trump has done and will maintain tariffs of 25% on steel imports, a situation that benefits our North American unit.”

Acerinox is mulling requesting support from EU funds for a total of five projects focused on digitisation, hydrogen and renewables use at its Spanish production unit. The company has presented these projects to the Spanish government call for interest.

Todor Kirkov Bulgaria

Global steel demand performed in 2020 better than previously expected, and the outlook for 2021 has also been revised upwards by worldsteel, Kallanish learns from the association.

In its previous outlook issued last October, worldsteel had expected finished steel demand to fall 2.4% on-year in 2020. The association confirmed on Thursday, however, that the fall was only 0.2% y-o-y, to 1.7 billion tonnes.

“Despite the disastrous impact of the pandemic on lives and livelihoods, the global steel industry was fortunate enough to end 2020 with only a minor contraction in steel demand,” says worldsteel economic committee chairman Saeed Al Remeithi. “This was due to a surprisingly robust recovery in China, with growth of 9.1%. In the rest of the world steel demand contracted by 10%.”

This year demand is expected to recover by 5.8% y-o-y and in 2022 by 2.7% y-o-y. Last October worldsteel forecasted a recovery in 2021 of only 4.1%.

While the figures appear positive, worldsteel director general Edwin Basson is quick to note that mature economies are not expected to fully return to 2019 steel consumption levels by end-2022.

India is expected to see the fastest recovery in 2021, with demand rebounding by almost 20% y-o-y, after a fall of 13.7% y-o-y in 2020. Turkey was the sole major steel user to see a recovery in demand in 2020 – by 13% y-o-y – due to the strong contraction registered in 2019. In 2021 Turkish demand is set to continue growing rapidly, by 18.7% y-o-y.

The trend for mature economies, though, is clearly more challenging. The US is set to see demand rebounding by 8.1% y-o-y in 2021, after a drop of 18% y-o-y in 2020. Germany’s steel demand will recover by 9.3% after a drop of 11.6%.

Currently, most global markets are suffering from supply shortages, due to a number of factors, not least the delayed impact of lockdown measures and reduction in steel output during 2020. Basson believes these shortages should ease gradually in the second part of this year, as the market is adjusting, albeit slowly.

Emanuele Norsa Italy

Developing economies, excluding China, suffered more from the Covid-19 pandemic in 2020, but steel demand is expected to show a relatively quick rebound in 2021 and 2022, worldsteel says in its April short-range outlook (SRO).

Finished steel demand in developing economies will increase 10.2% on-year in 2021 to 478.2 million tonnes, following a 7.8% decline in 2020 to 433.8mt, the association says. “India, the Middle East and North Africa, and most Latin American countries suffered the most with inadequate medical capacity, a collapse in tourism, commodity prices, and insufficient fiscal support,” it explains.

However, benefitting from the global economic recovery and with renewed government infrastructure initiatives, steel demand in developing economies is expected to rebound in 2021 and then by a further 5.2% next year.

India’s steel demand will also increase this year to 106mt, up by 19.8% on-year, after it fell 13.7% to 88.5mt in 2020. The growth-oriented government agenda will drive India’s steel demand up, while private investment will take longer to recover, the association observes.

Steel demand in Russia is expected to be more in 2021 by 3% on-year to 43.8mt, following last year’s decline by 2.3% to 42.5mt. The country suffered less than other regions thanks to government measures that supported construction activities. “Russian companies are more oriented to the domestic market for now, but we expect that will change in the foreseeable future and export volumes will increase,” worldsteel director general Edwin Basson told Kallanish during the SRO presentation on Thursday.

In the MENA region, steel demand suffered from the cancellation of construction projects and a fall in oil prices, but the rebound of oil prices helped demand to recover towards the end of 2020. MENA demand this year will be 66mt, up by 6.1% on-year, after the decline by 9.5% in 2020 to 62.2mt. It is expected to recover with the resumption of infrastructure investments.

Latin American economies were severely hit by the pandemic, but in 2021 steel demand will reach 42.7mt, up 10.6% on-year, following the 7.9% decline to 38.6mt in 2020. Mexico’s steel demand was hard hit by reduced auto production and investment. However, the fast recovery in the automotive sector and a strong US economy will increase steel demand in 2021 by 7.5% to 23.4mt, after it was down 11.8% in 2020 to 21.7mt, worldsteel observes.

Svetoslav Abrossimov Bulgaria