CELSA at IREPAS: Lower demand and rising costs result in great volatility in prices

Monday, 10 October 2022 13:56:58 (GMT+3)   |   Istanbul

During his presentation at the SteelOrbis 2022 Fall Conference & 87th IREPAS Meeting held in Monaco on October 9-11, Alexander Gordienko, export director of Spain’s CELSA Group, shared some macroeconomic figures such as the IMF’s global growth prospects, indicating that global growth will slow down from 6.1 percent in 2021 to 3.2 percent in 2022 and 2.9 percent in 2023. He said that both emerging and advanced economies are expected to slow down. According to the IMF’s expectations, growth forecasts are declining for the EU and the US, with the best performance expected from India. Speaking of inflation, Mr. Gordienko pointed out that in the EU inflation is driven by food and energy prices and the danger the steel industry is facing because of inflation is falling demand.

Commenting on steel production, the CELSA official said that world steel production is expected to decrease by 7.2 percent or by about 140 million mt in 2022, noting that only India will produce more this year, with its output expected to rise by seven percent. On the consumption side, long products consumption is estimated to amount to 864 million mt in 2022, down 5.8 percent which, he said, is an improvement compared to the forecast of 9-10 percent at the time of the last IREPAS conference held in May. Looking at particular products, rebar consumption is expected to decrease by 6.5 percent to 397 million mt in 2022, while estimated declines for wire rod, merchant bar and sections stand at 9.4 percent, 0.5 percent and seven percent, respectively.

Commenting on prices, Mr. Gordienko said that lower demand for finished steel and the rising cost of production results in great volatility in prices. Looking at the spread between scrap and rebar, the CELSA official said that mills have to reduce sales amid weak demand and high costs, adding that there is no point in reducing prices. He added that, with the rising cost of energy, developing countries will have to start passing costs on to consumers and how steel mills will be able to grow with extra costs is yet to be seen. Answering a question about the cost of electricity per ton of steel produced, Gordienko said that the share of electricity cost in production was 10 percent before the energy crisis, while today it has risen to 50 percent or even to 60 percent for per ton of rebar.

Focusing on China, Mr. Gordienko said that there is a slow-motion financial crisis in China, as the real estate market continues to deteriorate with new construction starts falling more than 40 percent every month since April of the current year. He also indicated that the financing scheme in China which was focused on infrastructure investments is not working anymore.

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