At the 15th SteelOrbis "New Horizons in Steel Markets" annual conference being held virtually on December 1-3 due to the Covid-19 pandemic, Barış Çiftçi, head of strategic initiatives and raw materials markets evaluation at the World Steel Association (worldsteel), explained that the weakness which emerged in 2019 in steel production was caused by the slowdown in global manufacturing activity led by a worldwide decline in global auto sales and economic downturns in some developing countries such as Brazil and Turkey, which hit steel demand and output. “Both developing countries and major steel-using countries were expecting a mild recovery in 2020 in global manufacturing and automotive sales, and the first months of 2020 had been moving in line with expectations until the pandemic happened,” Mr. Çiftçi said.
According to the worldsteel official, global blast furnace output excluding China declined by 13 percent in the first nine months of 2020. Blast furnace output was down 20 percent in the EU, US and Japan, 14 percent in India, six percent in South Korea and was up two percent in the CIS region, while in China blast furnace output increased by 4.9 percent in the January-October period, all year-on-year. Projected steel demand for 2021 for the rest of the world, excluding China, stands at 815 million mt, 45 million mt lower than 2019. Looking at the EU, Mr. Çiftçi said that the expected recovery in steel demand for 2021 is 10-11 percent, which still shows a 10 million mt loss compared to 2019. He underlined that, not only for 2020-21, but also for the long term, a steel demand loss is not ruled out.
Mr. Çiftçi stated that, for the past few years, the price difference between scrap and iron ore has remained low and this situation has also been sustained during the pandemic. While China has increased its iron ore and metallics demand and driven global demand for these products, resulting in price increases for iron ore, on the other hand the impact on scrap prices has been limited as scrap imports faced restrictions in China, creating a more competitive picture for scrap. In a turbulent year, scrap prices have not been so volatile, Mr. Çiftçi noted. He said that, although both scrap demand and supply were affected at the beginning of the pandemic, scrap demand was then supported by the recovery in Turkey and by the construction sector being less affected compared to other industries.
According to worldsteel’s predictions, global iron ore supply is expected to increase by 130 million mt by 2025 compared to 2019, while some risks remain in iron ore supply: namely, potential delays in return of operations and the continued risk of disruption because of the pandemic in Brazil and the quality issues faced in Australia. Çiftçi added that, while China has lower quality iron ore reserves, its interest in developing projects in Africa appears to have increased. Regarding coking coal, very limited output growth of about 10 million is expected up to 2025, insufficient to mitigate weather or operational disruptions, with most of the supply coming from Australia. Taking into account that coking coal demand from India is expected to increase, the very limited growth in supply is worrying, according to the worldsteel official, who explained that supply growth remains limited as coal investments are becoming more difficult to support financially, while severe price volatility and increasing trade frictions may also be taking a toll on interest in project development.
Çiftçi also elaborated on China’s ban on scrap imports which came into effect in 2019, drastically reducing ferrous scrap imports from 2.3 million in 2017 to less than 200,000 mt in 2019 and to negligible levels so far in 2020. He went on to say that scrap imports may resume in China in 2021 according to market reports, while taking into account the time required to finalize standardization, ratification by the Chinese authorities, and so on.