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The World Steel Association is optimistic that government funding for infrastructure projects will help to support steel demand as economies recover from the effects of the coronavirus pandemic, Director General Edwin Basson said June 4, as the association reported it expects global steel consumption to contract by 6.4% in 2020.

In the US in particular, the pandemic has caused a sharp manufacturing recession, which is expected to reach its lowest point in the second quarter, worldsteel said in its Short Range Outlook report, released June 4.

In its updated forecast, worldsteel said it expects steel demand in the NAFTA region to drop 20% year on year to 108 million mt in 2020 from 135 million mt in 2019. For 2021, worldsteel forecasts NAFTA steel demand will total 114.7 million mt.

“The fall in oil prices has placed additional downward pressure on energy sector investment, which was already distressed prior to the crisis,” worldsteel said of the US steel market. “Surging unemployment is leading to reduced income and confidence, impairing residential construction. Although non-residential construction is faring relatively better, it is expected to face a decline in 2020 and a slight recovery in 2021.”

Much of the decline in US construction activity has likely already been seen in recent months as states stopped some construction activities amid more aggressive virus mitigation efforts, Basson said in a video call.

“We think [infrastructure] most definitely will become part of government policy as an initiative in order to get economic systems to revive and recover and therefore we are quite optimistic that expenditure on infrastructure investment around the world may also continue at quite a nice pace,” he said.

In its outlook, worldsteel noted that overall it does not expect the decline in construction activity to be as severe as the drop seen during the financial crisis of 2007-09.

Residential construction activity will likely be constrained over the next year, however reconditioning work on existing family homes seems set to be supported, particularly with many people staying home and spending less amid stay-at-home orders, Basson said.

Non-residential construction may be the area that sees the most adjustment over the course of the next year or two as businesses look at their value chains and make changes in favor of shorter supply chains, he added.

— Justine Coyne

The World Steel Association said June 4 it expects annual demand for steel to fall by 6.4% to 1.65 billion mt this year before recovering close to pre-pandemic levels in 2021, led by China and the construction sector.

“The decline in steel demand in most countries will be less severe than during the global financial crisis as the consumption, which have been hit hardest, is less steel-intensive,” said Edwin Basson, worldsteel general director during a video conference to its Short Range Outlook report. “In many developed economies, steel demand was already at a low level, having still not fully recovered from 2008.”

The association sees annual steel consumption recovering to 1.72 billion mt in 2021, just shy of levels of demand in 2019.

Steel industries have been hit by a general freeze in consumption, shutdowns and disrupted supply chains caused by the Coronavirus pandemic. Demand is expected to have declined significantly in most countries, especially during the second quarter, with consumption improving slowly as lock downs ease in the second half of the year, said the association.

Reductions in global steel demand will be mitigated somewhat by a faster recovery in China. The world’s second-largest economy is fast approaching normalization, except for the hospitality and tourism sectors. By the end of April, all major steel-using sectors in China were back to near full productivity, with demand expected to grow by 1% this year.

Europe, North America, India and steel markets in developing Asia are expected to take longer to rebound, said Basson.

Construction recovery

The association predicted that the construction sector in China could be a “useful” tool for the government to sustain the demand recovery in the economy. Automotive and mechanical industries have taken the biggest hit from the crisis among the steel-using sectors. Car making was already seen under pressure from the transition to electric vehicles and government policies to reduce passenger transport density in cities. The automotive industry is expected to see a 20% drop in sales this year and a recovery to pre-crisis levels of activity could take several years, said the association.

Mechanical machinery manufacturers will also be hit by a substantial decline in demand this year as investment projects are put on hold, or cancelled.

The worldsteel outlook was postponed and released in June due to the uncertainties created by the pandemic. The association is expected to release another outlook in October.

— Annalisa Villa

The coronavirus emergency across the world could well accelerate the ongoing regionalisation of markets, Edwin Basson, director general of the association said in a press briefing this week.

The executive noted that the tendency to move away from globalisation was already seen during recent years, but the latest Covid-19 emergency could well accelerate further the need also for steel trade to become more regional and to shorten supply chains.

While worldsteel does not comment specifically on local trade policies, since 2016 a rapid decline of steel international trade has been seen, accelerated further by the imposition of the Section 232 measures in the US. Now this trend seems to have gathered pace again as many countries close further possibilities for international trade to protect their local steelmakers.

According to the latest figures published by worldsteel, steel products international trade in 2019 represented only 25.1% of the total steel production in the world. This share is the lowest since 1980. Back in the 1997-2008 period the share stood steadily above 35%

In volumes terms the 2019 figure of 437 million tonnes traded internationally is the lowest since 2013. Given the expected steel demand reduction for 2020, the traded volumes globally should lower further this year, Kallanish notes.

Steel Demand Forecast – June 2020
(million tonnes)	2019	2020	2021
EU 28	158,1	133,1	147
Other Europe	33,8	33,3	36,5
CIS	58,8	52,7	56,5
NAFTA	135	108	114,17
Central/South America	42,4	35,1	39,3
Africa	36,4	33	34,9
Middle East	48,7	40,2	45,4
Asia and Oceania	1253,3	1218,6	1243,2
WORLD	1766,5	1653,9	1717,4

The World Steel Association has issued its outlook for steel apparent demand, indicating that this year global demand will fall by -6.4% y-o-y, before recovering 3.8% y-o-y in 2021, Kallanish reports.

The outlook was postponed by the association due to the uncertainties created by the Covid-19 outbreak. “The COVID-19 crisis, with its disastrous consequences for public health, also represents an enormous crisis for the world economy. Our customers have been hit by a general freeze in consumption, by shutdowns and by disrupted supply chains. We therefore expect steel demand to decline significantly in most countries, especially during the second quarter. With the easing of restrictions that started in May, we expect the situation to gradually improve, but the recovery path will be slow,” worldsteel said.

The fall expected for this year is in line with the one registered in the 2008-2009 financial crisis, nevertheless Edwin Basson, director general of worldsteel, noted that this time around steel demand is expected to fall less compared with the dramatic fall projected for global GDP.

While most of the global steel using countries will be strongly impacted by the fall, China is expected to see its steel demand growing 1% y-o-y. Together with Turkey and Vietnam, China is the sole country expected to increase steel use this year among the top 10 users globally. India, meanwhile, the second largest steel user globally, will see its demand falling by -18% y-o-y.

Edwin Basson added that the one presented currently is the most realistic scenario. Worldsteel has also prepared a worst case scenario, which indicated a more dramatic demand fall.  “One key uncertainty remains the possibility of second and third waves of virus outbreak and how these will impact the economy depending on countries’ approaches,” Basson explains.

While worldsteel expects a swift recovery of 3.8% y-o-y for steel demand in 2021, taking volumes back to above 1.7 billion tonnes, it is likely that 2019 demand levels will not be fully recovered until 2022.

Antonio Marcegaglia, head of the homonimous group, has expressed his scepticism over the new further closure of the EU steel import market as a consequence of the review of safeguard measures and new investigations.

Speaking during a webinar this week, the executive noted that he understands and supports the need to protect in some ways the European steelmakers following the slump in demand due to the coronavirus emergency. He added, nevertheless, that so far the decisions made by the European Commission have not been correct.

“I am not ideologically against limiting imports, even though my group is a large importer. During the last quarters and in the second part of last year we have bought more in Europe than abroad, as possibilities were available. I would have understood a reduction of tariff-free safeguard quotas (not as much as requested by Eurofer), to align them to current demand. Nevertheless the decision proposed by the Commission is not satisfactory,” Marcegaglia said.

Last week the Commission notified the WTO of its proposed changes to the safeguard system. HRC imports will be the most impacted by the new rules, as quotas will be assigned on a country-specific basis rather than globally. The volumes are nevertheless calculated on the basis of 2015-2017 figures and risk forcing a reduction of as much as 50% for HRC imports during the 12 months starting in July, Kallanish notes.

Marcegaglia added that the opening of AD and countervailing investigations on Turkish HRC imports as well as the possible increase of AD duties for Russia’s Severstal indicate that the European Union wants to close its market further.

Going forward the executive confirmed that an acceleration in the regionalisation of the steel market is highly possible.

ISD Huta Czestochowa (HCz) lessee Sunningwell International Polska has declared its intention to acquire the heavy plate mill privately after HCz received no bids in its tender sale this week, Kallanish learns.

HCz’s trustee has submitted an application to the Czestochowa district court to confirm the terms of the next tender. The court is expected to announce its decision by 5 June.

The court said in April Sunningwell International Polska has a pre-emption right to acquire insolvent HCz. If another bidder were to win the auction, it would not be permitted to take possession of the mill until the deadline expires for Sunningwell to exercise its pre-emption right, or until Sunningwell waives this right.

Polish steelmaker Cognor and UK-based Liberty House were previously thought to be interested in the Polish steelmaker, while Metinvest, itself a producer of plate in neighbouring Ukraine, was touted as a potential investor.

Electric arc furnace-based HCz has an 800,000 tonnes/year slab capacity and 1.2 million t/y capacity of heavy plate.

French crude steel production plunged again year-on-year in April after a strong decline in March. This follows a hike in January and a decline in February, Kallanish learns from data released by the Federation Française de l’Acier (FFA).

Crude steel output declined by as much as -54.9% y-o-y in April to 581,000 tonnes. This is down from 1,288,000t in April 2019, the association says.

Over the first four months of 2020 French crude steel output also fell significantly y-o-y, by -22.1% to average just over 1 million tonnes/month. This is down from 1,289,000 t/month in January-April 2019, FFA says.

Before the coronavirus pandemic, 2019 output had dipped by -6.1% on-year to 1,204,000 t/month. This was down from 1,282,000 t/month in 2018, which in turn fell from 1,292,000 t/month in 2017, the FFA says.

British steel said June 3 it will halt production at its Skinningrove rolling mill on June 13 for three weeks and furlough around 300 staff, in what will be the second closure in three months due to low demand as a result of COVID-19.

Skinningrove was halted at the beginning of April for three weeks.

“Trading conditions in our markets remain challenging, including for products manufactured by our Special Profiles business in Skinningrove,” a spokesman said.

“While a small number of employees will remain on site, around 300 of our people will be furloughed…This is a temporary measure and, like last time, we will look to resume production at the earliest opportunity.”

Skinningrove produces steel products for industries such as yellow goods, rail and construction that has been hard hit as orders dried up. A spokesperson from British Steel was unable to provide figures on the amount of production capacity will be lost.

British Steel’s operation at Lackenby – Teesside Beam Mill – as well as the two blast furnaces in Scunthorpe will continue working, the spokesman said.

Last month, British Steel was purchased by Jingye Group. The Chinese company pledged to invest GBP1.2 billion ($1.5 billion) into British Steel, including improvements to production infrastructure, with the construction of an electric arc furnace in Teesside, opening 800 jobs in the area.

British Steel is the UK’s second-largest steelmaker behind Tata Steel, with 3 million mt/year of installed products capacity. The company has primary blast furnace production at Scunthorpe Steelworks and rolling facilities at Skinningrove and Teesside in the UK.

According to market sources, last year British Steel produced around 2.5 million mt of liquid steel.

According to S&P Global Platts data, the company produces 96% of the UK rail network’s steel rail, with Network Rail alone taking 100,000 mt/year. Other major customers are JCB, Caterpillar and South Africa’s Robor.

— Annalisa Villa

According to the company, the new sizes, available in stock and production in standard packages of 1,500-2,000 kg, are made thanks to Marcegaglia Group’s investments, with the purchase of a new cut-to-length line, able to flatten coils up to 2,000 mm wide and 12 mm thick.

Meanwhile, Italian plantmaker Danieli said that it will upgrade Marcegaglia’s 4-hi plate mill in San Giorgio di Nogaro, Italy, with new hydraulic cylinders, a new L2 process control system, and upgrading of the furnace automation system.    

The company stated that both revenue and earnings were affected by the economic meltdown, non-recurring effects, and the economic consequences of the coronavirus. Coupled with worldwide trade conflicts, these developments hit Europe’s export-driven industry, which accounts for about two-thirds of the company’s revenue, particularly hard. The automotive segment, which is important for voestalpine, slumped worldwide, while iron ore prices rose globally in the face of simultaneously falling steel prices.

On the other hand, Voestalpine will maintain its current programs that are aimed at cutting costs and boosting efficiency. “From today’s vantage point, a scenario that posits an improvement in the economy as a whole after the summer of 2020 is likely,” Voestalpine AG chairman Herbert Eibensteiner said. He said he also expects Voestalpine to generate EBITDA of between €600 million and €1 billion in the business year 2020-21, given the continued volatility of the economic environment. The company plans to reduce its investments to €600 million this year from €777 million in 2019-20 in response to the macroeconomic environment.