Download - Outlook for the Global Steel Market - IndMin
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Outlook for the Global Steel Market
Metal Bulletin Research
Julia Tilley Metals Analyst
©2014 Metal Bulletin Research www.metalbulletinresearch.com
Disclaimer: Prices and other information contained in this presentation have been obtained by us from various sources believed to be reliable. This information has not been independently verified by us. Those prices and price indices that are evaluated or calculated by us represent an approximate evaluation of current levels based upon dealings (if any) that may have been disclosed prior to publication to us. Such prices are collated through regular contact with producers, traders, dealers, brokers and purchasers although not all market segments may be contacted prior to the evaluation, calculation, or publication of any specific price or index. Actual transaction prices will reflect quantities, grades and qualities, credit terms, and many other parameters. The prices are in no sense comparable to the quoted prices of commodities in which a formal futures market exists. Evaluations or calculations of prices and price indices by us are based upon certain market assumptions and evaluation methodologies, and may not conform to prices or information available from third parties. There may be errors or defects in such assumptions or methodologies that cause resultant evaluations to be inappropriate for use. Your use or reliance on any prices or other information published by us is at your sole risk. Neither we nor any of our providers of information make any representations or warranties, express or implied as to the accuracy, completeness or reliability of any advice, opinion, statement or other information forming any part of the published information or its fitness or suitability for a particular purpose or use. Neither we, nor any of our officers, employees or representatives shall be liable to any person for any losses or damages incurred, suffered or arising as a result of use or reliance on the prices or other information contained in this publication, howsoever arising, including but not limited to any direct, indirect, consequential, punitive, incidental, special or similar damage, losses or expenses. We are not an investment advisor, a financial advisor or a securities broker. The information published has been prepared solely for informational and educational purposes and is not intended for trading purposes or to address your particular requirements. The information provided is not an offer to buy or sell or a solicitation of an offer to buy or sell any security, commodity, financial product, instrument or other investment or to participate in any particular trading strategy. Such information is intended to be available for your general information and is not intended to be relied upon by users in making (or refraining from making) any specific investment or other decisions. Your investment actions should be solely based upon your own decisions and research and appropriate independent advice should be obtained from a suitably qualified independent advisor before making any such decision.
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Introduction
Latest Developments
Outlook
Conclusions
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Steel news, prices & analysis
Market analysis and forecasts
Company data for metal and mining industries
Prices for the physical spot iron ore market
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Introduction
Latest Developments
Outlook
Conclusions
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Crude Steel Production, year-on-year % growth
-4.9…
-1.9…
7.0%
-1.4…
-2.0…
-3.1…
2.3%
-1.8%
0.8%
-4.1%
-0.8…
0.2%
14.8…
5.6% 4.
2%
8.4% 2.
1%
3.6%
3.2%
7.5%
2.9%
-1
9…
-4.4…
-2.9…
2.6%
3.6%
2.3%
Key
World Total
2012
2013
Q1 2014
8.1%
3.9%
2.1%
Source: MBR, WSA
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0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Mill
ion
tonn
es
Global Crude Steel Production by Region
Other
Middle East
CIS
Other Asia
Americas
Europe
China
-15%
-10%
-5%
0%
5%
10%
15%
20%
Global Average Industrial Production vs Steel Production, year-on-year % change
Steel IP
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0
100
200
300
400
500
600
700
800
900
Mill
ion
tonn
es
Chinese Crude Steel Production
2001-2013 CAGR = 15.3%
1993-2000 CAGR = 5.0%
0
100
200
300
400
500
600
700
800
900
Mill
ion
met
ric to
nnes
Rest of World Crude Steel Production
Other Asia Europe Americas CIS Middle East Other
1993-2000 CAGR = 4.5%
2001-2013 CAGR = 2.9%
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10% 11%
20% 20% 16%
15%
5%
54%
34%
5% 7%
16%
38% 38%
47%
4%
-4%
-33% -40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
2008 2009 2010 2011 2012 2013
Year-on-year growth in key Chinese industries
Area under construction Passenger car production
Vessel deliveries (CGT)
55%
21%
7%
5%
2% 1%
9%
Construction
Machinery
Automotive
Energy
Shipbuilding
HomeAppliancesOthers
Source: MBR, CEIC, MIIT
Chinese steel consumption by industry, 2013
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0%
2%
4%
6%
8%
10%
12%
14%
16%
Chinese finished steel production, Jan-Apr 2014, year-on-year growth
Total Finished Steel Production
• Chinese finished steel production grew 5.9% year-on-year in the first four months of 2014 but the growth rates are questionable given the far slower growth in crude steel at 2.7%.
• Reported rebar production growth was well above average levels and given the steep price falls and margin reductions at producers, it would appear that such output growth has been excessive.
• However the even higher growth for coated steel has not had the same impact, thanks to stronger domestic and external demand.
• Mill profitability overall has been negative, thanks particularly to a terrible first two months, affecting longs mills especially.
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2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
6,000
Chinese Domestic HRC Prices, RMB/tonne
-23.8%
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
6,000
Chinese Domestic Rebar Prices, RMB/tonne
-35.8%
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55.0 – 75.8
75.8 – 86.4
86.4 – 96.0
96.0 – 107.1
107.1 – 116.2
European production in construction (Index, 2010 = 100)
• German, Polish and Hungarian construction activity indices are well above levels in 2010
• While in Italy and Portugal construction activity has not recovered and market sentiment is languishing with debt laden economies and high unemployment rates impacting investment spending
• The construction industry is a key driver of long product demand, such as rebar, which is used to strengthen concrete, and beams, the ‘skeletons’ of buildings
• The resulting weak domestic demand in Italy and Spain means steel producers have re-orientated business to export to faster growing Middle East and North Africa
• However, competition is stiff in these markets from CIS and Turkish exporters in addition to increasing local capacity.
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0
25,000
50,000
75,000
100,000
125,000
150,000
175,000
200,000
225,000
EU28 Crude Steel Production
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
EU28 Crude Steel Production vs Prices year-on-year change
Production (LHS) Domestic Rebar Prices (RHS)
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50
70
90
110
130
150
170
190
210
230
250
Domestic HRC Prices, Index 100=Jan 2006
EU US China
50
70
90
110
130
150
170
190
210
230
250
Domestic Rebar Prices, Index 100=Jan 2006
EU US China
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0
5
10
15
20
25
30
Mill
ion
Tonn
es
Middle Eastern Crude Steel Production
Iran Saudi Arabia Qatar UAE Other
2010-2013 CAGR = 9.7%
1994-2009 CAGR = 5.9%
• Fifteen consecutive years of growth
• 2010 - 2013, UAE’s CAGR was 79.2%, Iran’s was 8.7%
• A booming construction industry necessitating higher steel consumption
• Steel demand is coming from oil country tubular goods (OCTG), a growing market, driven by the oil and gas in the region
• Cheap gas in the region makes DRI plants attractive; as these come online the Middle East will be less import dependent
• This could hurt Turkish producers who export a lot of long products to the Middle East
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0
10
20
30
40
50
60
2012 2018
MENA DRI/HBI production growth (M tonnes)
• The key theme over the next five years will be backward integration
• MENA crude steel capacity is 96 million tonnes
• Long products and HR flat capacity are 84m tpy
and 34m tpy respectively
• Thus, the region is short of crude capacity, necessitating semi-finished steel imports
• MBR’s MENA EAF-based steelmaking outlook for the coming years is therefore positive
• Production will be partly fed by significant volumes of new DRI/HBI capacity
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Introduction
Latest Developments
Outlook
Conclusions
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• Traditionally, apparent steel demand and supply softens over the second half of the year overall and especially within the EU.
• As a result, recent failures by European mills to
raise prices in the first half have given many market participants the impression that any subsequent efforts, in the traditionally weaker months to follow, will also fail particularly if Chinese production simply gathers pace as usual.
• Mills for their part, however, claim that typical restocking over the first half has not occurred and judging by recent data we have, they may well be right as the dotted lines indicate.
• As a result, the second half could be shaping up to be stronger than usual.
21.5%
22.5%
23.5%
24.5%
25.5%
26.5%
27.5%
Q1 Q2 Q3 Q4
Average production splits by quarter since 2000
World EU
China EU 2014
China 2014 World 2014
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0
50
100
150
200
250
300
350
400
450
500
Chinese stocks of HR & CR coil, '000 tonnes
HR COIL
CR COIL
0
200
400
600
800
1,000
1,200
Chinese stocks of rebar & wire rod, '000 tonnes
Wire Rod
Rebar
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• Crude steel production to grow by 3.0% this year, down from 3.6% in 2013.
• We anticipate that production will rise in the second half of the year as restocking returns, with the growth rate year-over-year accelerating to 4.0% from just 2.0% in H1.
• We expect low margins will force Chinese mills to curb production during the second half of the year, enabling mills in other markets to bolster production and their capacity utilisation.
• As in China, however, we anticipate that production will slow in Europe over H2 for similar reasons, contrary to the trend from the start of the year when regional growth exceeded all other major markets.
0
50
100
150
200
250
Mill
ion
Tonn
es
Global crude steel production
EU USA Other Asia Other World Chinese steel
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0
50
100
150
200
250
300
350
400
450
500
Q110
Q210
Q310
Q410
Q111
Q211
Q311
Q411
Q112
Q212
Q312
Q412
Q113
Q213
Q313
Q413
Q114
Q214f
Q314f
Q414f
Domestic HRC Margins over scrap/hot metal, $/tonne
EU HR coilUS HR coil marginChinese HR coil margin
0
50
100
150
200
250
300
350
400
450
500
Q110
Q210
Q310
Q410
Q111
Q211
Q311
Q411
Q112
Q212
Q312
Q412
Q113
Q213
Q313
Q413
Q114
Q214f
Q314f
Q414f
Domestic Rebar Margins over scrap/hot metal, $/tonne
EU rebar marginUS rebar marginChinese rebar margin
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0
50
100
150
200
250
300
350
400
450
Chinese crude versus IP, 100=2003
Chinese steel
Chinese IP
0
20
40
60
80
100
120
140
160
Rest of World crude versus IP, 100=2003
EU
USA
Other Asia
Other World
Rest of World IP
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Introduction
Latest Developments
Outlook
Conclusions
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• Steel production growth will slow in 2014 compared to 2013
• Chinese IP growth forecast to slow and crude steel production will falter
• In the rest of the world production growth will be faster than China’s
• Thus, overall raw material demand will grow steadily, but be more spread out across the world as steel production mirrors demand growth
• Smaller regions such as the Middle East will continue to rapidly increase production much as China did ten years ago
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