Category Archives: Steel Exports

Global Steel Sector in Turmoil

The implementation of Section 232 by the US authorities has created chaos in steel markets, worldwide. Since the investigation was launched, in April 2017, steel prices have rocketed. MEPS’ reported selling value for the main benchmark product, hot rolled coil, has increased by 40 percent, in North America.

Further tariffs are now being considered, by the US, for imports of a wide range of manufactured goods that have a high steel content. These include automobiles and associated spare parts. Other manufactured goods are under consideration for inclusion in the extended regime.

Numerous retaliatory actions have been announced by trading partners of the US. Furthermore, import restrictions are under consideration, by many national authorities, as they fear the distortion of trade flows. Protectionist measures, which started because of steel imports into the US, may spread around the world and affect a wide range of manufactured goods. This would undo years of careful negotiations towards free trade.

Source: MEPS International Steel Review

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Section 232 Continues to Cast a Shadow Over Emerging Steel Markets

Brazil

Brazilian steelmakers are optimistic about the strength of domestic consumption in 2018, highlighting improving market fundamentals in both the local and global steel markets. Additionally, Brazilian exports to the United States are temporarily exempt from measures related to the Section 232 investigation.

Russia

Negotiations in the Russian Federation remain arduous. Trading houses continue to be frustrated with the pricing positions adopted by their domestic suppliers. The latest initiative is viewed as unwarranted and not supported by underlying demand.

India

The Indian steel industry is forecasting that underlying demand will remain strong until mid-June, supported by government infrastructure spending and strengthening consumer demand. Nonetheless, MEPS notes growing resistance from end-users to the recent price increases. Moreover, the Modi government signalled it planned to formally lodge a trade dispute against the United States, at the World Trade Organisation (WTO), if the Trump administration does not exempt Indian steel goods from rising tariffs.

Ukraine

Supply chain participants report no changes to business activity, in the Ukrainian steel market. Stockists are concerned about carrying too much inventory over the next two months, fearing a downward price correction. Export activity is stable, with prices under renewed negative pressure following developments in the Chinese market.

Turkey

End-user demand in Turkey is tepid, disrupted by Mustafa Kemal Atatürk (National Sovereignty and Children’s Day), and renewed political uncertainty. Presidential and parliamentary elections are scheduled for June. The depreciation of the Turkish lira against the US dollar further exacerbated the situation. Scrap brokers predict that the domestic mills will try to push scrap prices down again in the near future, as both export and local demand remains slow.

UAE

Challenging business conditions persist, in the United Arab Emirates. Distributors are adopting a “wait-and-see” attitude, expecting purchasing activity to slow down ahead of the festive month of Ramadan. However, the outlook for the remainder of 2018 is positive, after the announcement of new commercial, residential and infrastructure projects, in Dubai and Abu Dhabi. Outside the GCC region, export opportunities are limited.

South Africa

South Africa’s Department of Trade and Industry (DTI) failed to persuade the US government to exempt the country’s steel and aluminium exports, from the tariffs, stipulated in the Section 232 proclamation. In further submissions, the ministry proposed a settlement based on 70 percent of the 2017 exports as a quota to the US. South Korea negotiated a similar quota arrangement with provisions, in late March.

Mexico

Mexican steel traders retain a cautious outlook for the second quarter. Downstream buying activity is unsettled by the aggressive pricing strategies adopted by domestic suppliers. Moreover, developments across the border in the United States continue to be watched carefully. Meanwhile, the National Chamber of Iron and Steel Industry (CANACERO) pressed the government for additional measures to protect the domestic manufacturing and steel industries from foreign competition.

ARE THE WORLD TRADE ORGANISATION’S CURRENT RULES FIT FOR PURPOSE?

The global steel industry is in crisis. It has to be said that the principal reason for the predicament is the collapse in steel prices in all parts of the world. The drop in selling values has been brought about by oversupply in the market.

Much of the excess has been created by over investment in steelmaking capacity in China, to levChina-exportsels way beyond internal demand. This oversupply was translated into significant quantities of the excess material being exported, in recent years, at highly competitive prices. As a result, the MEPS world average, US dollar denominated, steel price has declined by 28 percent over the past twelve months.

In the current climate, with very few exceptions, the steelmakers across the globe are in a lossmaking situation. Many of them have already closed and more will follow in the near term. For most carbon grades, the Chinese export landed price has become the benchmark selling figure in many domestic markets around the world. Such selling values are not tenable in the long term for any steel manufacturer.

The dynamics of global steel trade has changed dramatically over the past ten years. In 2005, China’s exports and imports were in equilibrium. In 2010, the country’s positive balance of trade was approximately 25 million tonnes. In 2015, this figure will have expanded to, in excess of, 100 million tonnes. This equates to 12 percent of estimated total steel consumption in the rest of the world.

It is clear that China’s steel industry has developed a dominant position in the global market. Despite numerous complaints, the World Trade Organisation (WTO) has not been in a position to influence the situation. China’s dominance could not have been achieved so easily if the industry had not been, mainly, state controlled.

It is well documented that, in the first nine months of this year, total losses by the Chinese steel sector were US$4400 million – equivalent to US$7.5 per tonne of output. The deficit for export sales would be, at least, at the same level per tonne.

The Chinese authorities have revised the previously established definitions of alloy steels to enable their steel producers to claim VAT rebates on those exports. This has given the mills better opportunities for exporting.

Had the majority of the Chinese steel industry not been state-owned, it is likely that it would have been unable to withstand the current lossmaking situation. Moreover, it is questionable whether, predominantly state-owned, industries should be afforded the same protection as privately-owned ones when issues of trade are considered by the WTO.

MEPS view is that industries, such as steel and others, which are predominantly state-owned, should be excluded from any new agreement on market status within the WTO.

Source: MEPS – China Steel Review

SIGNIFICANT INCREASE IN CHINESE STEEL EXPORTS – MEPS INTERNATIONAL LTD

Chinese exports of steel products increased by 9.5 million tonnes during the first six months of this year, compared with the same period in 2013. MEPS estimates that offshore supply represents approximately 60 percent of the escalation of mill output in the period.

Foreign sales of finished rolled steel mill products climbed to 31.85 million tonnes in the first half of this year – up from 22.3 million tonnes in 2013. This gain in export activity was not confined to the popular importing nations. Of China’s top thirty export destinations, twenty nine recorded increased tonnages in 2014. The exception was Singapore with a minimal reduction of 0.4 percent.

Chinese steel is, currently, extremely price competitive in most global markets. Over the past twelve months, material from China’s steelmakers has become cost effective, to many customers in the West, despite long delivery lead times. However the most popular destinations remain those in the Asian continent.

In the first half of 2013, six countries imported in excess of one million tonnes of Chinese steel products – all of them in Asia. By comparison, in the January to June period, this year, steel exports of more than one million tonnes were shipped to twelve countries. These included two none Asian nations – United States and Brazil.

It is worth remembering that the economies of a number of South East Asian nations have built up, in recent years, a strong need for supplies of competitively priced steel products for their development. Many factories have been specifically set up in these countries to use local labour for assembly of products for western multi-national corporations.

So far in 2014, we have seen a number of significant changes to the pattern of Chinese exports over the past twelve months. Sales to Japanese customers went up from 273,000 tonnes in the first half of last year to 762,000 tonnes in the same period, this year. Exports to Brazil almost doubled in the same time span.

Steel supplies to the United States, in the first six months of 2014, increased by 77 percent, year-on- year. Most of the gain was in flat products. Other countries with significant advances, so far this year, are Pakistan, India, Belgium, Chile and UAE. In almost every case of increased import activity, the main driver was the competitive price.

Source: MEPS China Steel Review – August Edition

UNITED STATES HAS BECOME A MAGNET FOR GLOBAL STEEL EXPORTERS

According to MEPS regional steel price trends have diverged over the past twelve months. Selling values in North America have been strong, whereas those in the EU and Asia have come under negative pressure.International Steel Review

In North America, we have witnessed a number of exceptional factors during the last year, including unplanned outages and weather-related disruptions to raw material and steel deliveries. These have resulted in tightened supply and extended delivery lead times. Consequently, local mills have been able to push through a series of domestic price rises.

European and Asian steelmakers have, predominantly, failed to lift selling figures because of falling input costs, subdued demand and increased competition.

As a result, there has been a substantial differential between North American steel prices and those in the rest of the world. Major exporters have taken note of this and attempted to sell their material into the region.

Data from ISSB indicates that US imports of all steels have risen by around 30 percent in the first six months of 2014, on a year-on-year basis. The increase for flat steel products has been more pronounced at approximately 45 percent over the same period.

Many steel buyers in North America have seen the potential to lower their costs and opted to bring a greater portion of their steel from overseas. However, this situation has not gone unnoticed. The US steel mills and their related associations are calling for measures to protect the local industry.

Although overseas material has been very competitively priced, possible protectionist moves by the US government have created a great deal of caution amongst both traders and potential customers regarding forward ordering of material from third countries.

We believe that prices in EU and Asia will reach the bottom in 2014, after three years of declines. A modest rise in demand should help to boost selling figures next year. Economic conditions should improve marginally. However, iron ore costs will remain subdued but other input expenditure could grow.

In contrast, a slight downward price correction is envisaged in North America following a strong 2014. Nevertheless, our prediction is for the discrepancy between North American and global selling values to remain substantial compared with past trends.

Source: MEPS International Steel Review – August Issue

HALF OF CHINA’S INCREASED STEEL OUTPUT IN Q1/14 WAS SOLD IN EXPORT MARKETS

Chinese steel demand growth is slowing down. This is partly due to high inventories throughout the supply chain but also a decrease in government investment. Despite this, output in th e first four months of 2014 increased by 2.7 percent compared with the same period last year. By historic standards, this is a modest rate of growth.ChinaJune

However, it is worth noting that approximately 50 percent of China’s increased, year-on-year, steel production in the first quarter of 2014 was exported. Moreover, imports of steel into China in the first quarter of this year are little changed from the figure in 2013.

This is bad news for steelmakers in the rest of the world. In the first three months of 2014, Chinese exports have increased by 22 percent, year-on-year. In the medium term, this will put negative price and supply pressures on domestic steelmakers in most other regions.

According to the latest data available, total exports of finished steel products by Chinese mills increased from 15.4 million tonnes in the first quarter of 2013 to 18.8 million tonnes in the same period of 2014 – a rise of 3.4 million tonnes. In the January to March period of 2014, output of finished steel totalled 192.3 million tonnes compared with 185.5 million tonnes in the equivalent time span in 2013 – a gain of 6.8 million tonnes.

China’s exports of finished steel products, in the first quarter of this year, were close to ten percent of the total output – the highest ever recorded. This level of export activity is likely to spark a new set of anti-dumping cases in the second half of 2014.

Source: MEPS China Steel Review