Posted on 09 Apr 2019
Higher iron ore prices are unlikely to harm blast furnace-based mills’ competitiveness versus scrap-based EAF competitors, while US-China trade negotiations are likely to drag on. This was the conclusion of the International Rebar Exporters and Producers Association (Irepas) traders committee.
A US-China agreement is unlikely to be reached anytime soon, as China will not bow to US demands that are “…not easy to swallow,” committee chairman F.D. Baysal said at Monday’s Irepas meeting in Barcelona.
China’s main exports to the US are electrical appliances and machinery. This business has diminished during the trade war, thereby reducing Chinese demand for hot and cold rolled coil. This, coupled with the recent addition of new flats capacity, is pressuring prices, Huseyin Ocakci of CIEC Korea Corporation said at the meeting attended by Kallanish.
After China came back from its New Year holiday, iron ore prices started to increase. This, along with reduced iron ore allocation from Vale following its dam collapse, has put upward pressure on ore prices, Ocakci observed. It has also had a knock-on effect on scrap prices in some markets.
Baysal added, however, that even if iron ore goes to $100/tonne, blast furnace-based mills will still have a more favourable cost position than EAF steelmakers.
Sourcing graphite electrodes still remains “… tough” for Turkish mills, as there are two suppliers – in the US and Japan – from which certain sizes can be procured. “There is hardly any chance to negotiate,” said Duferco’s Wilhelm Alff of electrodes prices, adding that higher prices are here to stay.
Ocacki said there are reasons to be positive over China. Chinese steel inventories are reducing faster than previously expected and China cut 120 million tonnes/year of crude steelmaking capacity in the two years over 2017-2018. In the last quarter of 2018 Chinese infrastructure project approval increased 3.7%, and real estate project mandating also grew. Construction on these will begin 3-6 months after approval.
“Local market demand is quite sufficient in China,” Ocakci observed. “We are not expecting the Chinese to be aggressive (in exports) in 2019.”
New crude steelmaking capacity has come on line in Vietnam, Malaysia and Indonesia, while the latter two plus the Philippines also have new steelmaking projects approved. This new supply will compete with or shut out steel supply from Turkey and the Middle East to Southeast Asia, Ocakci commented.
Moreover, the Middle East was traditionally a net exporter of steel from Turkey, but now it has become a net exporter of longs, especially to Southeast Asia. It is also taking market share there from Turkish suppliers, Ocakci added.
