Stemcor’s Sand: China revives global trade

The immediate future of steel trading is bright, and will be lit up by China, says Dick Sands, managing director for distribution at Stemcor.

Three major factors are shaping the ongoing ascending price trend in Europe, in particular into 2021: EU protectionist policies, Covid-19 and China, Sands said at the Kallanish Europe Steel Markets 2020 virtual conference this week.

After a two-year descent on the back of Section 232 measures restricting imports into the US, the strength of the rebound has taken many by surprise. European flat products prices are rising, but slower than in the US because the latter does not have enough internal capacity to meet demand. The EU has sufficient internal capacity while still allowing some imports, unlike the US. The bloc’s steel output is set to increase significantly as idled blast furnaces are being brought back on line after Covid-19 restrictions curbed output.

Covid-19 has acted as a major trigger by reversing China’s external trade pattern to imports. China’s appetite for semis has enabled an 80 million tonnes/year swing from exports to imports. The country imported around 35mt of semis and another 4mt of pig iron, and is preparing to start importing scrap – another major factor why prices will continue rising.

China consumes an estimated 40m t/y of scrap, meaning a potential major squeeze for raw materials, thereby escalating the price rise and making blast furnace production relatively cheaper and more productive, Sands said.

He cautioned European steel producers to continue to heed the harsh lessons of the 2008-2009 economic crisis and be more disciplined in their pricing, instead of competing with each other by lowering prices. Armed with strong protectionist measures, amid growing demand supported by government stimulus, European mill prices will continue rising, as long as China continues buying, Sands concluded.