Franc Cardona: “Demand for long steel products in EU is still below pre-crisis levels”

Monday, 06 April 2015 11:48:06 (GMT+3)   |   Istanbul
       

How would you describe global long steel demand growth in 2014?

Regarding global long steel product consumption, one should in the first place note that it is consolidating the sustained growth of the last five or six years, and it is already at 145 percent of the pre-crisis levels seen in 2007-2008.
 
In 2014, global long steel product consumption grew by 2.3 percent. I would like to highlight two aspects of this: first, that it implies that long product consumption worldwide is growing at a faster pace than overall global steel consumption; and, second, that North America contributed significantly to the figure in question with double-digit growth.

How do you see long steel demand in Europe in 2015?

Demand for long steel products in the European Union is expected to show a moderate increase in 2015, consolidating the trend of recovery after the deep economic crisis which started back in 2007-2008.

There are strong elements to support this, notably the benefit of low oil prices, a weak euro, the recent launch of the quantitative easing program by the European Central Bank, as well as the expected moderate growth in the European construction sector of about 1.5 percent for 2015.

However, one should not forget that current demand for long steel products in the European Union is still well below the pre-crisis levels, and therefore one should conclude that demand in Europe is still low.

It is also noticeable that each European member state will have its own particularities and performance. In particular, southern European countries will still have very low demand levels, and countries such as France and Germany may well perform below the average.

How do you view the outlook for long steel in the long term? What factors affect the long steel outlook in positive and negative ways?

In general terms, it should be stated clearly that the long-term fundamentals for long steel products at a global level are strong, very strong.

According to the United Nations, world population is expected to reach about 8 billion people by 2025, and more than 9 billion by 2050, which will reinforce the strong global urbanization trend. 66 percent of the world's population is projected to be urban in 2050, adding 2.5 billion to the current 3.9 billion people residing in urban areas. This process will necessarily have to be accompanied by massive housing and infrastructure projects.

In fact, according to Global Construction Perspectives, global construction expenditure is expected to rise by $6.3 trillion, or by over 70 percent, to reach $15 trillion by 2025, compared to $8.7 trillion in 2012.

All key steel long products, namely, reinforcing steel, wire rod, structural steel and merchant bars, will clearly benefit from this trend in a significant manner.

Do you observe an increase in long steel exports from the EU in 2015? What is your view of the demand situation?

In my opinion, it is too early to talk about increases in long steel product exports from the European Union. It is not clear at all what will happen in the international markets in the coming months or years.

On the one hand, there is no doubt that a weak euro should help European exports in general, and that global demand for long steel products is expected to increase in 2015.

On the other hand, since the global economic crisis started in 2007-2008, there has been a huge increase in protectionist measures applied by non-European countries in relation to the steel sector, and also some key developing economies may be affected by low oil and raw material prices, all of which certainly reduce export possibilities.

Finally, one should not forget that European steel producers have adapted their production capacities to post-crisis levels, while some key international competitors such as China have been increasing production capacities. If the deceleration of China's growth continues, particularly in the construction sector, one should expect Chinese exporters to be present as key players in the international arena.

Considering the pressure on margins in the market, what suggestions would you make to long steel producers?

In my opinion, the margins for EAF-based producers should improve progressively following the reduction of the gap between scrap and iron ore prices. In addition, some producers, such as the European producers, should benefit in terms of margins from a strong dollar.

In any case, the European steel industry has adapted its production capacities to post-crisis levels. It is fundamental to have a reasonably balanced supply and demand in the regional steel industry. In this respect, it is worth mentioning the significant overcapacity in China, which the Chinese authorities may already be considering addressing, due to both environmental and economic reasons.


Similar articles

Turkish steel industry’s carbon emissions can be cut by 99% by 2053

19 Mar | Steel News

Veysel Yayan: Turkey’s exports expected to increase in 2024, crude steel output may exceed 40.4 million mt

05 Mar | Steel News

Ayhan Uçar: Scrap will be more valuable during green transition, Turkey may face scrap supply issues

05 Mar | Steel News

Turkish steelmakers remain under strong pressure to export

29 Nov | Steel News

Tayfun Iseri: Market concerned over possible further regionalization

28 Nov | Steel News

IREPAS: Outlook for Q1 2023 unstable and highly unpredictable

15 Dec | Steel News

Steel mills in Turkey reshaping billet imports, bigger problems may be seen in scrap in mid-term

15 Dec | Steel News

Turkey’s steel industry faces declining competitiveness amid higher costs and shrinking exports

15 Dec | Steel News

Barış Çiftçi: Global steel industry on edge of transition process 

30 Nov | Steel News

Veysel Yayan: Burden of energy costs should not be placed on industry

30 Nov | Steel News