Source: Financial Express
Global steel industry is shaping up comparatively better than what it was at the beginning of the year. The first four months saw the crude steel production at 550.8 MT, growing at 5.2% over last year with China, US, Germany and India exhibiting positive rise during the first four months.
The capacity utilisation of the global steel industry that dipped to as low as 64.9% in December 2015 has since moved to a respectable 73.6% in April 2017.
The PMI for May 2017 for all the major countries is better in the expansion mode as compared to April. The outlook of order position by the business community is better as gathered by the survey. The current growth in industrial production (6.5% in China, 2.2% in USA, 1.8% in Germany and 2.4% in Russia) signals a positive boost for steel production. It is good news that spending on infrastructure in the form of replacement of old bridges and other structures, new rail lines and roads, setting up of new mega and mini cities (new city in China), new ports and oil/gas pipelines would contribute significantly to demand for steel.
Further, the automobile sector, among other manufacturing segments, having an average 25% of steel consumption in the EU, the US and Japan is looking up, buoyed by lower gasoline prices, rising household income, better road network and competitive prices.
The raw material scenario is much less volatile as the prices of both iron ore and coking coal have come down from a hefty rise a few months earlier although for different reasons and are being settled at market determined rates of $55-60/t cfr China and $150-155/t fob Australia. It has been projected that raw material prices are definitely coming down further in the coming months as demand for steel from China is likely to fall.
The financial results of the major global players like ArcelorMittal, Baosteel, Posco, Nippon and Mitsubishi, Severstal in first quarter of 2017 indicate a better financial recovery compared to what they have seen in the immediate past period. Apart from drop in raw material costs, a period of higher realisation on HRC, Plates and Re Bar has helped the producers to improve their bottom line. It may be noted that export price of Chinese HRC (SS 400) fob Tianjin port ruling at $477/tonne in December 2016 is currently ruling at $434/tonne. The Turkish export price of Re Bar ruling at $427/tonne fob in December 2016 has moved up to $430/tonne.
WSD estimates that world median cost curve for HRC (including overhead) have moved up from $410/tonne in December 2016 to $483/tonne in June 2017.
Another indicator of reversal of the declining fortune for global steel industry is provided by the domestic price trend of major products. For instance, HRC domestic prices in North Europe that was ruling at $574/tonne in December 2016 currently stands at $566/tonne, the same category in US domestic market has risen from $628/tonne to $650/tonne in the same period, while Turkish export prices of Re Bar has gone up from $427/tonne in December 2016 to $430/tonne in June 2017. The domestic prices of HRC in Brazil have moved up from $639/tonne in December 2016 to $642/tonne in June 2017. Rising or marginally downward trend in prices in manufacturing sector over a period of 6 months signifies higher levels of activities and is a strong driver of increasing income and more job opportunities in the country.
The banks and other financial institutions of the various countries who are prominent steel producers are also relieved on the better repayment prospects of the stressed loans provided to the sector and are likely to turn positive on the fresh credits required by the sector. China is eliminating surplus, inefficient and polluting steel capacities and targets more than 50 MT closure of induction furnace based steel capacity in the current year which would prompt the Chinese producers not to undertake cut in export offers and thereby prevent further downward trend in steel prices. The spate of anti dumping and CVD imposition of duties on cheap and dumped Chinese steel would be a big deterrent against any move by China to cut down prices.
In an overall analysis unless the violent political events disrupt the gradually improving global manufacturing scenario, the current year is to bring cheers to all the industrial players in the country.