Steel market
The steel and copper industries act as a kind of indicator of the health of the global economy. Both steel and copper are used as basic materials in a wide range of other industries - for example, in the production of household appliances, cars, industrial equipment, in the construction of railway infrastructure, real estate for various purposes, and so on.
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2023
Growth in steel production in Russia by 5.6% to 75.8 million tons
According to the results of 2023, the volume of steel production in Russia reached 75.8 million tons, which is 5.6% higher than a year ago. This is evidenced by the data of the World Steel Association (WSA), which became known in April 2024.
By the end of 2023, steel smelting in the Russian Federation almost returned to a record level in 2021, when Russian metallurgists produced about 76 million steel.
According to WSA estimates for 2023, Russia with its indicators remains in the five largest global steel producers - it closes it. In first place with a giant margin, China followed by, and India. Japan USA The United States increased steel production last year to 80.7 million tons from 80.5 million a year earlier.
The WSA data on the return of steel smelting to its historical maximum was confirmed to Kommersant by Boris Krasnozhenov from Alfa Bank. He recalled that Russian companies in the ferrous metallurgy sector remain one of the most efficient in the world with the current cost of about $300 tons of hot-rolled steel. In his opinion, in 2024, the total volume of steel smelting is likely to remain close to the level of 2023. But major manufacturers are showing nearly 100 percent capacity utilization, he pointed out.
In February 2024, Deputy Prime Minister of Russia, head of the Ministry of Industry and Trade Denis Manturov said that steel smelting in Russia in 2023 increased by 5.3%, "thereby overcoming the negative trend in 2022." According to Manturov, Russian metallurgists have fully adapted to the new conditions that arose after the start of the Russian Federation's military special operation in Ukraine and the Western sanctions that followed it. The head of the Ministry of Industry and Trade clarified that the stabilization of the situation on the steel market is due to the diversification of the sales structure, in particular, an increase in shipments to the domestic market, including for infrastructure projects and housing construction.[1]
Steel sales growth by 7% to 46.3 million tons
According to the results of 2023, steel consumption increased by 7%, to 46.3 million tons due to construction and mechanical engineering projects. This is evidenced by Severstal data published in February 2024.
The company estimates that the construction industry contributed the most to the market dynamics, which grew by 9% year-on-year. According to Severstal experts, the main drivers of metal consumption growth in this sector remain state support for the construction of social and commercial housing, stable interest in warehouse real estate, where low vacancy rates remain, and demand for individual housing construction, including with the support of special mortgage programs.
The consumption of metal products for the construction of infrastructure facilities (+ 13%), commercial buildings (+ 9%), as well as individual housing (+ 10%) increased.
It is noted that machine-building enterprises continue to recover from the crisis of 2022, growth in 2023 amounted to 14%. Steel consumption from the automotive industry increased by 29% due to high demand for freight, commercial and special equipment, increased production at AvtoVAZ and the production of auto components.
As Severstal emphasized, during 2023 the industry also managed to solve problems with components in the railway engineering segment, the demand for freight transportation increased - all this made it possible to increase production volumes and, as a result, consumption increased by 15%.
A source Kommersant among metallurgists believes that the level of domestic metal consumption in 2024 will remain at 2023 levels. MMK They believe that further growth in metal consumption during 2024 will be restrained by cooling demand in housing construction after raising the key rate.[2]
2022: Stainless steel imports fall by 20% to 372 kt
The import of stainless steel metallurgical products to Russia in 2022 amounted to just over 372 thousand tons, which is 19.6% less than a year earlier. Such data in February 2023 was cited by the Spetsstal association of consumers and suppliers of special steel and alloys.
According to her estimates, mainly imports came from China (242,300 tons), India (58,800 tons) and Indonesia (21,080 tons). At the same time, according to the industry agency Metals & Mining Intelligence (MMI), imports of stainless steel flat steel to the Russian Federation in 2022 decreased by 15% to about 300,000 tons. The data of Spetsstal included all types of stainless steel, including procurement, flat and long products, welded and seamless pipes, Vedomosti writes.
According to the publication, Russia uses stainless steel of foreign production by 70-80%. It is used in mechanical engineering, the production of household appliances, consumer goods (pots, spoons, forks), plumbing, electrical equipment, equipment for the food industry, pipes and the needs of the military-industrial complex. According to Ilya Kolomeyts, MMI Development Director, the demand for this product in Russia has decreased due to a failure in mechanical engineering, primarily we are talking about cars, a decrease in the production of consumer goods and household appliances. For example, the production of washing machines in Russia fell almost twice, which is associated with a decrease in real disposable incomes of the population and rising prices.
However, in the food industry, pipe production and construction, demand remained steady. Most likely, consumption from the IPC also increased, although there are no relevant statistics.
The Ministry of Industry and Trade recognized the reduction in imports of stainless steel products, but stressed that the production of this product from Russian metallurgists increased by 9,000 tons. The department did not specify the full production volumes.[3]
2019: Steel prices decline
Steel prices are declining on the global market. In October 2019, the average cost of steel dropped by 16% in China, by 18% in Europe and by 21% in the United States compared to the same period last year.
The price of iron ore, a basic steel-making raw material, has risen substantially since the Brumadinho dam disaster in Brazil, which forced mining company Vale, one of the world's largest, to suspend production of rich iron ore in the region. On average, 1.4 tons of iron ore and 0.8 tons of coke coal are needed to produce 1 ton of steel in a blast furnace. The increase in prices for basic raw materials significantly reduces the profitability of blast furnace steel production, while companies using mainly steel scrap in production suffer significantly less from price increases.
The consumer sectors of steel raw materials are also going through hard times. Thus, the European and Chinese auto industries suffer from tightening environmental standards and a decrease in personal demand, which is explained, among other things, by consumer concern about trade conflicts. In the United States, car sales are also declining due to rising prices and trade risks. The construction industry, especially the infrastructure segment, is showing mixed dynamics. The company's experts predict that demand for residential construction in European countries will remain quite low due to a slowdown in economic growth in the EU and high prices for urban housing. On the other hand, the positive momentum for the construction industry in 2020 could be access to relatively cheap and affordable debt financing. Chinese developers are not in such a favorable position, since servicing loans in the PRC is significantly more expensive than in the EU. However, the Chinese authorities, apparently, intend to start implementing a number of new infrastructure projects that could turn into a considerable profit for steel producers. Rising wages and employment in the United States are supporting demand for housing. Investors, however, are worried about a cooling global market and worsening protectionism.
Risks for the industry in 2020: expert analysis
Coface experts predict that at the end of 2019, the growth rate of world GDP will be 2.6%, in 2020 - already 2.5%. Given the high probability of a decline in steel demand in a number of industries, we can expect that steel producers' revenues will continue to decline. The growth rate of American GDP, according to the current forecast of the company's analysts, will fall almost twice (from 2.2% in 2019 to 1.3% in 2020), and at the same time, business activity in the metallurgical sector will probably fall. Warehouse stocks are accumulating quickly, and market conditions over the next few quarters promise to become more favorable, according to Nucor, one of the largest American steel producers. Producers using iron ore to generate steel will have to put up with rising prices for basic raw materials, while enterprises using steel scrap will be in a better position, as the price of steel scrap in the US market fell in 2019 to only $479 per ton.
Tightening environmental regulations can increase the already high costs of manufacturers. It is believed that approximately 5% of greenhouse gases in the United States are generated precisely through the activities of steel industries. If we talk about other countries, we can note Italy, where ArcelorMittal is currently involved in litigation with the Italian government over the Ilva plant. The authorities Italy insist that ArcelorMittal, the world's largest steel producer, should invest in the introduction of the latest "green" technologies at the Ilva plant in order to reduce harmful emissions and minimize the impact of production on the environment.
In China, a government policy called "Blue Sky" provides for a number of requirements that steel producers are required to use only rich iron ore with a minimum proportion of impurities in order to reduce harmful atmospheric emissions. The steel industry is the second largest "polluter" of the atmosphere after the housing and communal industry, which uses coal to generate electricity. Steel producers throughout China are forced to invest in the introduction of technologies to reduce harmful emissions under the threat of stopping their factories.
In the United States, the Donald Trump administration has canceled a number of initiatives to reduce harmful atmospheric emissions, adopted during the presidency of Barack Obama. At the same time, however, the current president intends to increase the productivity and competitiveness of the national steel industry through restrictions related to reducing the amount of energy used by foundries. If this intention comes to fruition and American manufacturers really invest in buying new, more technologically advanced blast furnaces for their plants, the amount of harmful emissions in the United States steel industry could decrease significantly.
The sector appears to have recovered from the Brumadinho dam disaster in Brazil as iron ore prices began to decline, but nowhere near as fast as steel prices, alarming producers. Chinese businesses are buying up rich iron ore to meet emissions standards set by authorities, so producer profits are unlikely to grow substantially anytime soon. Under Coface's baseline scenario, steel price levels will not recover to recent relatively high levels in 2020. Nevertheless, if Vale manages to resume mining rich iron ore in damaged mines, steel producers around the world will surely breathe a little freer. Coface experts, however, believe that the decline in prices for basic raw materials in 2020 in any scenario will be accompanied by a decrease in steel prices.
According to official data from Chinese authorities, the excess production capacity in the country has decreased over the past few years. However, it is expected that by 2030 Indian plants will produce up to 300 million MT of steel (compared to only 101 MT in 2017). The administration of Prime Minister Narendra Modi intends to actively develop Indian infrastructure, which is in a deplorable state today - this means that Indian manufacturers will have the opportunity to become suppliers in large infrastructure projects and, accordingly, make good money. India is the second largest global steel producer after China, but the commissioning of additional capacity may cause an even more significant drop in steel prices due to a shortage of demand - for example, one of the main consumers of steel products is the auto industry, while sales of new cars in India in the first 10 months of this year fell.
2018: China accounts for 52% of global production
In 2018, the world's largest producers of steel raw materials were:
In 2018, the international metallurgical industry suffered greatly from a sharp increase in American import tariffs on steel, and the subsequent trade war between the States and China only aggravated the situation, economists at the international group Coface say. According to the results of the 3rd quarter of 2018, the profitability of steel producers in terms of net profit amounted to 7.36%, and according to the results of the same period in 2019 - only 6%. At the same time, European and Chinese manufacturers suffered much more (-28% and -21%, respectively) than their American colleagues (-1.2%).
According to the OECD, the production potential of the global steel industry greatly exceeds both current production volumes and demand for its products. The excess production capacity at the end of 2018 reached 425.1 metric tons (MT) - about 22% of the total volume of steel produced for the entire year. If product demand stagnates or declines, producer revenues could plummet.
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