During the second day of the 16th SteelOrbis Steel Conference “New Horizons in Steel Markets” held Thursday, December 2, online, George Pearson, fundamentals analyst at NLMK Trading SA, talked about the Russian flat steel market, sharing figures and expectations. Mr. Pearson said that in the second quarter this year sheet prices and demand were particularly strong both in Russia and the export markets, benefiting producers. Although Russian demand decreased in the second quarter it improved as of the third quarter amid the government stimulus in housing policy, mainly the state preferential mortgage program. However, Pearson stated that overall sheet demand in Russia contracted in the third quarter, including an 11 percent year-on-year decline in sheet demand from the construction industry and a 24 percent fall in demand from pipe makers, while demand from engineering rose by 23 percent year on year.
Regarding the expectations for the full year, the NLMK official said that Russian hot rolled coil and plate steel demand is expected to fall by three percent in 2021 compared to 2020 because of overall displacement of demand due to high prices, a number of price-sensitive projects being delayed to later periods, and the slowdown in engineering sector recovery in the third and fourth quarters. On the other hand, hot rolled steel consumption is expected to grow by 2.5 percent in 2022, due to continued demand from the residential housing sector and the restart of projects delayed in 2021, while Pearson pointed out that consumption is forecast to stabilize in 2023.
Looking at China, Mr. Pearson stated that steel production in China will peak in 2021 and start declining afterwards amid China’s determination to reduce carbon emissions and given changing economic conditions. Additionally, he also informed the conference participants that China’s commodity-grade exports are falling, and so China flooding the global commodity steel market is now less of a concern and this threat will continue to decline. Instead, China is focusing on exports of high value-added steel and finished products within growth markets, which will cause protectionism to shift further down the value chain. This is already evident in the EU’s antidumping duty investigation against Chinese steel wind towers for instance.
Mr. Pearson also explained NLMK’s carbon emission reduction strategy, including the upgrade of the blast furnace No. 4 which will enable a 98 percent reduction in carbon emissions and energy self-sufficiency, while envisaging the construction of a third captive power plant at NLMK Lipetsk, running on by-product fuel gases and clean power supply. He also mentioned NLMK’s plans for a 2.5 million mt HBI production facility at Stoilensky.