If we were worried about China’s dominance of global steel output over the last decade, the next decade is looking like it may be even worse.
Having bounced back robustly this year from severe coronavirus lockdowns in Q1, China is on track to top 1 billion tons of steel production by the end of 2020, beating 2019’s 996.3 million tons despite steel-consuming industries suffering a lockdown.
Indeed China is the only major producing country to have increased output this year, up 5.6% at the end of October. Europe, North America, Japan, South Korea, and India are all down over the year cumulatively, leading to a global 1.9% reduction.
Although U.S. steel imports are down for the year, October imports picked up.
U.S. steel imports jumped approximately 27% from the preliminary September total to the preliminary October figure.
For the year through September, the U.S. imported 16.1 million metric tons. Meanwhile, for the same period in 2019, the U.S. imported 20.5 million metric tons.
Rebar, cold-rolled sheets and blooms, billets and slabs pace increase
Per the Census Bureau data, the U.S. saw significant jumps in imports in three categories: rebar; cold-rolled sheets; and blooms, billets and slabs.
From September to October, imports of blooms, billets and slabs jumped from 80,154 metric tons to 233,798 metric tons, an approximately 192% increase.
Rebar imports nearly doubled, jumping from 39,080 metric tons to 76,347 metric tons.
Cold-rolled sheet imports jumped from 67,173 metric tons to 94,863 metric tons, a 41% increase.
On the other hand, imports of sheets and strips, tin plates, and hot-rolled sheets declined from September to October.
In U.S. steel imports news relevant to the oil sector, imports of oil country goods (OCG) for the year to date declined.
Imports during the nine-month period totaled 831,459 metric tons. That total marked a 54% year-over-year decline.
However, the oil price has picked up of late. The WTI crude oil price closed Nov. 24 at $44.91 per barrel, up $3.48 per barrel from the previous week, per the Energy Information Administration.
Furthermore, from September to October, imports of OCG rose 126% to 47,526 metric tons.
Oil demand remains depressed amid the pandemic, with many foregoing car trips (or vacations altogether) and a significant percentage of the U.S. workforce transitioning to remote work setups. However, recent announcements regarding the efficacy of potential COVID-19 vaccines could serve as a shot of support to demand for various steel products, including OCG, as Americans become more comfortable with returning to the previously normal rhythms of life.
Of course, when mass rollout for such vaccines will occur is still up in the air.
U.S. steel imports surge from Mexico, Turkey
Viewed through the lens of imports by country, the U.S. saw an increase from Mexico. The U.S. imported 252,348 metric tons of steel from Mexico in October, up 34% from the previous month. While perhaps a niche consideration for the steel market at large, the United States Trade Representative recently announced a preemptive exemption for Mexico from a potential future Section 232 tariff on grain-oriented electrical steel.
Meanwhile, imports from Canada were about flat from September to October.
On the other hand, imports from Taiwan, South Africa and the U.K. declined, per the Census Bureau.
In year to date, increases came from Turkey, Brazil and Singapore. Imports from Turkey jumped from just 5,941 metric tons in September to 61,948 metric tons the following month. For the year to date, U.S. steel imports from Turkey jumped 65% to 387,608 metric tons in the January-September 2020 period.
Meanwhile, U.S. steel imports from Russia declined.
Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner, including Tata Steel and its attempt to spin off its European assets, the U.S.’s rising steel capacity utilization rate, China’s economic recovery and its impact on metals prices, and much more:
Ukrainian group Industrial Union of Donbass (ISD) acquired Hungarian integrated flats producer Dunaferr in 2004. The group also acquired Polish integrated plate producer Huta Czestochowa in 2005.
The Polish plant entered bankruptcy in 2019, however, amid what it called increasing difficulties in the European steel market.
Liberty Steelsubsidiary Sunningwell leased in 2019 the plant from Czestochowa’s bankruptcy trustee. In 2020, it won a tender to purchase the plant. Polish media noted in October, however, that the plant would remain leased until mid-2021.
Czestochowa is now operating, an administrator for the plant confirmed to MetalMiner. However, she declined to indicate what shops were operating or at what percentage of capacity.
Steel situation in Ukraine
One difficulty Czestochowa faced was reportedly due to the armed conflict in 2014 between Ukrainian forces and Russian-backed rebels in eastern Ukraine, resulting in creation of the breakaway Luhansk People’s Republic and the Donetsk People’s Republic, a November 2014 report in Polish media stated.
ISD subsequently lost control of its slab producer at its Alchevsk plant, which is in Luhansk People’s Republic, and from which it sourced slabs for rolling at Czestochowa.
Donetsk region, once Ukraine’s industrial heart and the location for the majority of steelmaking and rolling assets, is now the within the breakaway and unrecognized Donetsk People’s Republic. The republic contains Donetsk Steel, integrated metal and mining group Metinvest’s Yenakievo and Makeyevo plants and the Khartzysk pipe plant.
Reports of low operating percentages against capacities, industrial action by workers over unpaid back salaries and out-of-date equipment are also coming out of steelmakers in the Donetsk People’s Republic, sources told MetalMiner.
“Nobody knows what’s going on there,” a second analyst said.
European steel faces higher costs, environmental restrictions
Steel plants in Central and Eastern European states that are members of the European Union face not only higher costs, but also environmental restrictions that could eventually mean an additional $30-40 per tonne to make steel.
China’s recovery from the coronavirus pandemic has led to increases there in steel production and cheaper imports.
As a result, China’s rebound has further impacted European steelmakers in Central and Eastern Europe.
Foreign metals and mining groups started to acquire plants in Central and Eastern Europe in the late 1990s to early 2000s. Governments in those regions sought to privatize what in many cases were previously state-owned assets.
“The view was that the market was shifting east in terms of manufacturing bases,” as Western European automakers and white goods producers were setting up shop in those countries, one analyst said.
Some of the acquired assets also have either captive raw materials sources or easier access to them. This solved potential supply chain questions and allowed the acquiring groups to redistribute material elsewhere within their own network.
Many of the newer member states that joined from 2004 were also receiving subsidies from Brussels for infrastructure improvements. Those improvements would, in many cases, require steel, the analyst added.
This morning in metals news: the U.S.’s steel capacity utilization rate reached 71.4% for the week ended Nov. 14; a survey by INVERTO took a look at procurement trends during the COVID-19 pandemic; and steel prices continue to rise.
Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner, including the copper price, oil price gains and steel imports:
The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.
Week of Nov. 9-13 (copper price, oil price gains and more)
The copper price gained on the heels of Democratic candidate Joe Biden’s presidential victory, Outokumpu released Q3 results and a Midwest-based service center could be looking to expand nationwide.