Emerging Economies Transform the Global Stainless Steel Market

The shape of the international stainless steel market has changed, in recent years. Burgeoning economic growth, in the developing world – particularly, in Asia – has contributed to growing global production overcapacity, relative to demand. In turn, the number of protectionist trade measures has increased.

China’s crude stainless steel output soared from 2 percent of the worldwide total, in 1999, to more than 50 percent, in every year since 2014. India’s production capability has increased, rapidly, in recent years, while countries such as Indonesia, Malaysia and Vietnam are now providing significant tonnages of finished steel.

While, of course, the economic development of these countries leads to growing domestic consumption, the expanding stainless steel production exceeds this demand. Consequently, extra material is introduced into the international market.

Although the United States and South Korea have maintained very moderate growth rates, in the twenty-first century, the other established stainless steel producing countries have recorded shrinking output figures, since the peak year of 2006. Japan’s outturn, in 2018, was 20 percent below that reported 12 years earlier. The European Union’s annual production fell by 23 percent, during the same time period, while Taiwan’s output was slashed by 32 percent.

Many countries or trading groups have sought to protect their home markets from imports, with restrictive or punitive measures. Antidumping duties have become increasingly widespread.

The United States’ implementation of Section 232 tariffs and quotas, in March 2018, triggered consequential actions. The European Commission’s safeguarding measures, for example, sought to prevent diversion of materials previously destined for the US market, by setting import quotas at the prevailing levels.

As industries in the emerging markets grow, their major players extend their influence, internationally. Chinese producer, Tsingshan Iron and Steel, caused ripples in the global stainless steel trade, with its development of a new large-scale production unit in Indonesia. The plant’s output has introduced substantial tonnages of competitively priced material onto world markets.

Tsingshan recently announced its plan to invest in a new cold rolling facility in the city of Busan, in South Korea. The local government, in Busan, welcomed the move, as a prospective boost to the ailing regional economy. However, the projected output, of 600,000 tonnes per year, would substantially distort the local market. The announcement led to objections from domestic stainless steel producers and processors, as well as trade bodies. Local people have taken to the streets, in protest against the proposed plant.

Source: MEPS Stainless Steel Review – June 2019

Uncertainty and Price Volatility Dampens Steel Demand in Emerging Markets

Business sentiment is unsettled, in Brazil. Distributors and end-users are frustrated with the increased transaction values proposed by their domestic suppliers. The latest initiative, delayed until July, is viewed as excessive.

The business climate is challenging, in the Russian Federation. Inventory levels are being controlled, throughout the supply chain. We note a reluctance on the part of end-users to commit to forward orders. Price support from export customers is limited.

In India, steel distributors, operating adjacent to the Bay of Bengal, witnessed a fall in business activity, due to the onset of the monsoon season. We note little appetite for purchasing at present amongst construction firms. Both primary and secondary steel producers are reluctant to offer price reductions and more favourable payment terms, fearing such measures would lead to further negative price expectations. Traditionally, the monsoon season ends in September.

The trading atmosphere is unchanged, in Ukraine. Manufacturing activity is still tepid. Businesses remain reluctant to invest. The export market is very competitive. The local association of metal producers, Metallurgprom, report that finished steel production, in May 2019, totalled 1.741 million tonnes – up 4.6 percent, month-on-month.

Demand is tepid throughout Turkey. Service centres and distributors are reluctant to purchase as they would like to get a clearer picture of the market. Local end-user consumption is weak. No upturn in market activity is foreseen until the end of the summer, at the earliest. The mills are targeting overseas customers to offload their surplus output.

Difficult business conditions persist, in the United Arab Emirates. Market confidence is still lukewarm. Sales to end-users and distributors are weak. Producers considered implementing a domestic price advance, but, so far, this has not proved possible. Traditionally, sales volumes decline in August and September, as warmer temperatures curb construction activity. Export opportunities are limited outside the GCC region.

The outlook is unchanged in the South African steel market. Steel distributors are extremely reluctant to purchase material in the current business conditions. Activity in the public sector is lacklustre, at present, as the market awaits government decisions on new construction and infrastructure projects.

The prognosis for the Mexican steel market is unchanged. The business environment is unpredictable. Buying sentiment is being shaped by expectations of further significant price fluctuations. Service centres are reluctant to conclude contracts, due to weak orders from construction and manufacturing companies. Meanwhile, shipments of finished steel products to the United States have resumed, this month.

Source: MEPS Developing Markets Review

Fierce Competition in Growing Southeast Asian Steel Market

In many parts of the world, the outlook for growth in steel demand is quite modest. However, the region that continues to buck the trend is Southeast Asia. This area is a steadily developing market. All ASEAN countries recorded positive growth in 2018 – with similar projections expected, this year. Increased activity from the construction sector continues to be the catalyst for the rise in steel demand. 

Last year, a double-digit percentage increase in ASEAN steel production was noted. The ramp up of local facilities, such as Vietnamese steel manufacturer, Formosa Ha Tinh Steel Corporation, partially helped to provide the uptick in regional output. Nevertheless, Southeast Asia continues to be a significant net importing region for steel products – with China being the main source of supply. 

Despite a slowing domestic market, Chinese steel manufacturers continue to produce record amounts of steel. As a result, Chinese mills will inevitably turn their attention to traditional export markets, such as ASEAN, to sell their excess supply. Amid growing competition, both locally and from other steel exporting nations – notably Turkey, Russia and India – MEPS   anticipates that Chinese producers will reduce their export prices, in order to maintain their market share, in the region. This is likely to have a dampening effect on values across the region, for the remainder of the year.

At the recent South East Asia Iron and Steel Institute event in Bangkok, the consensus view of conference attendees was that ASEAN steelmakers may fail to capitalise on the rise in regional consumption, due to fierce foreign competition. Several Southeast Asian steel producers successfully petitioned to implement trade protection measures. However, this has, largely, failed to stem the flow of imports into the region. Chinese, Japanese and South Korean producers, in particular, continue to invest heavily, in steel manufacturing, in the region. However, it is reported that this level of foreign intervention may be to the detriment of regional mills. 

It is widely expected that Southeast Asian steel values will be under negative pressure, in the coming months. This is, partly, due to the likelihood of reduced import price offers from Far East suppliers, notably China. In the longer term, MEPS predicts that the ASEAN region will continue to be an attractive proposition for traditional steel exporters, amid stagnant growth projections, in the majority of steel-consuming countries. 

Source: MEPS International Steel Review – June

Hyundai Steel Awards SMS Group Order For Revamp Of The Heavy Section Mill at Incheon

After successfully completing the commissioning of its new horizontal straightening machine, Hyundai Steel has awarded SMS group a follow-up order for the revamp of its Incheon heavy section mill in South Korea.

With this revamp Hyundai Steel aims to expand its product range towards larger sections with webs of up to 1,100 millimeters and sheet piles up to a system height of 800 millimeters. SMS group takes up this challenge as the leader of a consortium with Hyundai Rotem, a subsidiary of Hyundai Motor Group.

As part of the project, various new functions will be added to the existing two-high breakdown mill stand and a new sideguard manipulator will be installed.

The rolling line downstream of the breakdown stand will be replaced by a new CCS®(Compact Cartridge Stands) tandem group and one additional CCS® finishing stand. The stands will feature nominal rolling forces of 12,000 kN for the horizontal rolls and 8,000 kN for the vertical rolls.

The CCS® stands will reduce the maintenance effort, and enable a shorter roll change time and higher rolling speeds, while achieving better tolerances.

Commissioning of the new rolling line is scheduled for October 2020.

With an annual crude steel production of 24 million tons, Hyundai Steel is one of the ten largest steel producers worldwide, supplying its products predominantly to the automotive, shipbuilding and general construction industries.

Source: SMS Group

Producers Attempt to Reverse Price Trend but Buyers Resist

Industrial activity and steel consumption are stronger, generally, in Scandinavia, than in the rest of Europe. Regional producers attempted to reverse the negative price tendency, and improve their profitability, by introducing increased selling values, for coils, sheets and plates, in June. Buyers, however, took a different view, and small price reductions were recorded, for most products, in the countries surveyed.

The poor regional sales environment kept hot rolled coil prices on a downward trend, in Denmark. Swedish purchasing activity is quite stable. Distributors, in Finland, are reported to be selling cheaply, in an effort to reduce their inventories. In the Netherlands, sales volumes are below forecast levels but transaction values appear to have bottomed out. European mill output cuts are having little effect on the Austrian market. Norwegian domestic sales are strong.

Danish end-user demand for hot rolled plate remains subdued. The Finnish market is quite strong. Demand is solid but unspectacular, in the Netherlands. In Austria, a small decline in transaction values was reported.

Cold rolled coil selling values remain on a negative path, despite European mill production cuts. Market participants believe that increased demand will be needed, to lift prices, following the summer holiday season. Finnish market activity is likely to reduce, significantly, as the summer vacation period approaches. Mill delivery lead times are stretching, in the Netherlands. Buying is weak, in Austria. Purchase volumes, in the Norwegian home market, are good.

Sales of coated sheet and coil to the automotive sectors remain subdued. Prices, in Denmark, continue to be on a downward curve. In Sweden, sales to non-residential building projects are healthy. European mills were unable to lift selling values, this month, in Norway, but increases are expected.

Demand for wire rod, from Swedish end-users, is strong. Orders from manufacturers are less robust, in Finland. Mill delivery lead times are short, and material is plentiful. Low sales volumes are expected, in the third quarter, due to widespread holidays and plant maintenance stoppages. The next tranche of EC steel quota availability will put more imported material onto the market, in July. Demand is inconsistent, in the Netherlands.

Beam prices remain under negative pressure, in Denmark. Steelmakers are reducing their output but Norwegian buyers report capacity available on imminent rolling programmes. Commercial building activity is at a good level, in Sweden. Demand from the building sector, in Finland, is quite weak. Sales volumes are satisfactory, in the Netherlands, and EU mills are pushing for increases. Construction activity is at a low level, in Austria.

Domestic reinforcing bar demand is fair, in Denmark, but regional consumption is weak. Sales, for infrastructure and non-residential building projects, are strong, in Sweden. Transaction values declined, in the Netherlands, in June. Austrian domestic prices decreased, amidst disappointing construction and infrastructure activity.

Danish buyers of merchant bars report modest order loads, on regional mills. Weak demand, in northern Europe, is having a negative effect on selling values. Supply chain participants believe that a substantial upturn in demand would be required to reverse the existing price trend.

Source: MEPS European Steel Review Supplement

Cautious Buying Persists as EU Mills Attempt Price Hikes

Attempts, by a number of EU mills, to lift prices for strip mill products, were limited, during the past four weeks. Buyers across northern Europe inform MEPS that they were able to negotiate rollover values, or even small discounts, with regional steel producers. Meanwhile, a small price upturn is noted in the Italian market.

Steelmakers’ profit margins are being squeezed. Nonetheless, the current imbalance between supply and demand is restricting the mills’ ability to lift steel selling figures. Furthermore, several regional steel producers, needing to fill their order books, did not follow the recent price hike initiative of the first tier suppliers.

Many EU steel distributors continue to purchase cautiously, concerned about their own tight resale margins. They lack confidence that they will be able to pass the producers’ proposed price hikes on to their customers. 

Nonetheless, European coil values appear to have reached the bottom of the current cycle. Elevated mill input expenditure should prevent steel prices from falling further. Moreover, steelmakers are actively trying to redress the supply/demand imbalance by cutting production.

ArcelorMittal had previously announced its intention to reduce output from its sites in Italy, Spain and Poland. Subsequently, the company issued details of additional supply restrictions in Spain and production cuts in France and Germany. Other EU steelmakers are, reportedly, reducing output by bringing forward, or extending, summer maintenance programmes at their facilities.

Another factor affecting supply is the European Commission’s import quotas. The EC is currently expediting a scheduled review of the safeguard measures, which was originally intended to be concluded by September 30, 2019. Various groups are lobbying for their own proposed amendments, with the current measures, seemingly, satisfying the requirements of few steel supply chain participants. Some parties wish for the quota allowances, for certain product categories, to be tightened up, and for it to be set country by country, rather than being on a global basis. Others want the reverse of these proposals. 

Although unlikely to be altered, one feature of the EC measures that appears to be to the detriment of the majority of affected groups is the quarterly aspect of the quota system. Having three-month periods encourages buyers to rush to purchase material, which can then languish at the ports waiting for the opening of the new quota allowance. This disrupts the traditional steady flow of material into the market, which is an important feature of the supply chain.

Source: MEPS European Steel Review