Australian Steel News- July

Steel Market Summary- May

The title and first sentence of Charles Dickens´ classic novel A Tale Of Two Cities aptly describe the contrasting positions of the major players in the world steel market. Confusion, despair, incredulity and optimism are all found in equal measure, but which ones apply to you depends on where you live. Having passed through the worst of their coronavirus outbreak (at least for now), Chinese steelmakers have ramped up production and are enjoying rising profit margins. For them “the best of times” may be nigh. For the rest of the world – and most notably the EU and USA – the coronavirus still calls the shots and the full darkness of the economic hole into which we are falling is yet to be known: as Dickens put it “the worst of times”. But no one exists in isolation during these days of global supply chains, so there may be a sting in the tail for China. If steel demand goes profoundly down, what happens to the world´s No. 1 steelmaker? First, the broad overview. The World Steel Association reports that crude steel production fell by 6% in March year on year. And yet, in the first three months of 2020 China increased its overall crude steel production by 1.2%. According to consultancy Mysteel, blast furnace utilisation rates at 247 Chinese steel plants now sit at 80%. Notably, production of steel rebar has jumped 43% since mid-March and wire rod is up 31%, based on an anticipated recovery in construction activity. Beijing has issued US$255 billion in bonds to finance urban renovations in 39,000 communities. By contrast, however, Platts reports that China´s domestic cold-rolled coil prices have slumped 19% since the start of 2020 on tumbling demand from manufacturers of household appliances and autos. Over in the United States, which is about two months behind China on the coronavirus timeline, plummeting demand for steel has led to substantial cuts in production and many furnaces being idled. Capacity utilisation rates have dropped below 60% at some mills, the lowest level since the financial crash of 2008/9. US hot-rolled coil prices dropped to a four-year low in late April as manufacturing and construction were dramatically curtailed during the lockdown. More than 30 million Americans have recently lost their job, and parts of the citizenry are rising up against regional authorities. In Europe, steel production has been cut by 50% and further losses are expected as new order bookings are down by as much as 75%, according to Eurofer, the European steelmakers´ association. “In some regions there are no customers anymore,” Eurofer has said, “…given the almost complete shutdown of the automotive industry and the significant decrease in construction activity.” Meanwhile, due to deteriorating business confidence in both India and South Africa, all steel trading activity was suspended in April.

Irrespective of the stage any individual country may be in its coronavirus health crisis, the world is certainly hurtling into a recession and a key factor for the steel industry is: supply chains. Around 40% of all household appliances made in China are exported. But at present the rest of the world isn´t buying. The building of mechanical equipment accounts for around 15% of global steel use. But with factories shuttered and capital expenditure plans around the world in tatters, demand for such machinery is hugely reduced: and thus for the steel used in its manufacture. The collapse in the price of oil will have a disastrous effect on investment in new plant and equipment in the energy sector. In the EU and USA, the auto industry accounts for about 20% of total steel use. But by mid-April, the European Automobile Manufacturers´ Association had reported the lockdown had caused the loss of 1.4 million units of car production. In March, all-vehicles sales in the US were down almost 40% y/y, while in Australia the March figure was 18% down on the previous March. As our charts this month show, whilst blast furnace production costs (typically for flat products) have come off by 10% in USD terms and by more than 15% in AUD, this has largely been on the back of a steep decrease in the coking coal price. Long product production costs increased on the back of 5% scrap increases, but were then negated by rises in the AUD month on month. Thus, the opportunity for domestic producers to increase prices when the AUD was 10-20% lower than now was a brief one. Given global economic uncertainty, domestic suppliers are likely to try to take every tonne whilst “the sun is still shining”. Domestic supply shortages do not seem to be a factor and importers and local producers alike will be hoping for low virus infection rates around the country leading to a loosening of retail and business.

Steel Rebar Turkey

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Industry Insider

The title and first sentence of Charles Dickens´ classic novel A Tale Of Two Cities aptly describe the contrasting positions of the major players in the world steel market. Confusion, despair, incredulity and optimism are all found in equal measure, but which ones apply to you depends on where you live. Having passed through the worst of their coronavirus outbreak (at least for now), Chinese steelmakers have ramped up production and are enjoying rising profit margins. For them “the best of times” may be nigh. For the rest of the world – and most notably the EU and USA – the coronavirus still calls the shots and the full darkness of the economic hole into which we are falling is yet to be known: as Dickens put it “the worst of times”. But no one exists in isolation during these days of global supply chains, so there may be a sting in the tail for China. If steel demand goes profoundly down, what happens to the world´s No. 1 steelmaker? First, the broad overview. The World Steel Association reports that crude steel production fell by 6% in March year on year. And yet, in the first three months of 2020 China increased its overall crude steel production by 1.2%. According to consultancy Mysteel, blast furnace utilisation rates at 247 Chinese steel plants now sit at 80%. Notably, production of steel rebar h

Steel Industry Services

The title and first sentence of Charles Dickens´ classic novel A Tale Of Two Cities aptly describe the contrasting positions of the major players in the world steel market. Confusion, despair, incredulity and optimism are all found in equal measure, but which ones apply to you depends on where you live. Having passed through the worst of their coronavirus outbreak (at least for now), Chinese steelmakers have ramped up production and are enjoying rising profit margins. For them “the best of times” may be nigh. For the rest of the world – and most notably the EU and USA – the coronavirus still calls the shots and the full darkness of the economic hole into which we are falling is yet to be known: as Dickens put it “the worst of times”. But no one exists in isolation during these days of global supply chains, so there may be a sting in the tail for China. If steel demand goes profoundly down, what happens to the world´s No. 1 steelmaker? First, the broad overview. The World Steel Association reports that crude steel production fell by 6% in March year on year. And yet, in the first three months of 2020 China increased its overall crude steel production by 1.2%. According to consultancy Mysteel, blast furnace utilisation rates at 247 Chinese steel plants now sit at 80%. Notably, production of steel rebar h

Australia´s leading stockist and supplier of ferro alloys, wear plate and accessories.
David Osborne
dosborne@sanwa.com.au
Tristan Mills
tmills@sanwa.com.au

Disclaimer:

Prices and figures quoted should be taken as indicative numbers only. While all care has been taken in compiling this newsletter, readers acting upon the information herein do so entirely at their own risk. The publisher accepts no responsibility for any consequences arising from commercial decisions made by readers. Most of the numeric information in this newsletter is freely available at the sources quoted.
Readers are urged to check figures against the original source. All comments expressed are the opinion of the publisher, unless otherwise stated. Copyright is reserved for the full contents of the newsletter.
Australian Steel News particularly acknowledges two of its principal sources of information: National Australia Bank (NAB) and South East Asia Iron and Steel Institute (SEAISI).

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