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[Market Insight] 2021 Global Steel Market Review and Outlook
Severely affected by the COVID-19 pandemic, the global steel industry showed a sharp decline in 2020, but with the recovery of the global economies and industries, the sector has seen a stronger than expected recovery in 2021.
Part 1: Global Steel Exports Review
Global steel exports are expected to increase by 10.3% in 2021 compared to 2020, based on the data released by International Steel Statistics Bureau (ISSB).
Source: International Steel Statistics Bureau (ISSB), unit: thousand metric tonnes
China: the vigorous recovery in global steel exports was mainly driven by a sharp increase in Chinese exports. From January to December 2021, China exported a total of 66.895 million tonnes of steel, an increase of 13.22 million tonnes or 24.6% Y-o-Y. China's net steel exports fell significantly at the end of 2020 due to an unexpected drop in exports and an increase in steel imports in May-June of that year, but again in 2021 the country's exports rose sharply, much higher than the year before.
EU: steel exports also saw significant growth, showing a positive growth of around 5.4% compared to 2020.
Japan, US, Russia: steel exports from those countries also rose in the first few months of 2021. While Japan's exports rose modestly by 5.8%, steel exports from the United States and Russia showed substantial growth, up about 23.8% and 14.6% Y-o-Y, respectively.
Turkey: Turkish exports rose 3.7% in the first half of 2021, while imports grew strongly during the same period, up 33.7% Y-o-Y, further narrowing the country’s steel trade balance, with Turkey’s net exports of just 623,100 tonnes as of April 2021.
India and South Korea: However, steel exports from India and South Korea fell by 31.9% and 2.5% Y-o-Y in the first half of 2021, respectively.
Part 2: Global Steel Imports Review
Global steel imports are expected to increase by 7.5% in 2021 compared to 2020, based on the data released by International Steel Statistics Bureau (ISSB). Steel imports figures for most steel economies in the Americas showed an upward trend in 2021.
Source: International Steel Statistics Bureau (ISSB), unit: thousand metric tonnes
Japan and US: steel imports both saw substantial increases, at 11.6% and 20.2%, respectively, while EU steel imports rose even more rapidly, at around 26%.
Brazil: while steel exports have remained relatively stable Y-o-Y, the country's imports have more than doubled over the same period.
Mexico: steel exports edged up by 1.6% in the first four months of 2021, but the country's imports rose sharply by 40%.
Canada: steel imports increased significantly in the first four months of 2021 after the lows in 2020.
Part3: Key Market Players: Review and Outlook
Steel production and China’s green efforts
Despite the impact of COVID-19, China's steel production continued to grow in H1 2021, with capacity utilization climbing to 94.8%, compared to 86.4% in 2019. However, in the push for green development, the country’s steel capacity utilization has declined steadily since July 2021.
In 2021, China’s national output of crude steel was reduced by 32 million tonnes, down 3% Y-o-Y (up 5.2% Y-o-Y in 2020); steel output was 1336.67 million tonnes, up 0.6% Y-o-Y, with the growth rate slowed by 7.1% Y-o-Y, as stated by The National Development and Reform Commission (NDRC) of China.
Facing global climate concerns, China has announced its goal to peak its carbon dioxide emissions before 2030 and become carbon-neutral by 2060. The country aims to significantly lower the energy consumption per unit of GDP and its CO2 by 13.5% and 18%, respectively, during the 2021-2025 period.
In addition, in preparation for the 2022 Winter Olympics, a series of air quality improvement measures are also being implemented. For example, in March 2021, nearly 30 steel mills in Tangshan, China’s largest steelmaking base, are required to curtail their production by 30-50% by 2021, and this activity will continue until March 2022; in May 2021, the country canceled the export tax rebates on 146 kinds of steel products, resulting in a significant reduction in the profit margins of steel exporters.
China Iron and Steel Association (CISA) predicted that driven by real estate and infrastructure investment, China’s production of crude steel will surpass 1 billion tonnes in 2022, an increase of 1.6% from 990 million tonnes in 2021.
China's“new infrastructure” projects - acts as new growth drivers.
In 2022, China is eyeing more targeted investments in “new infrastructure” projects to offset the economic impact of the pandemic and achieve sustainable growth. In addition to traditional infrastructure projects, the new projects span a series of key areas, including elderly care and nursing, culture, tourism and sports, energy storage systems, and grain-storage and grain-processing facilities.
According to relevant reports, at the beginning of 2022, infrastructure construction across the country kicked off, with 93 major projects starting with a total investment of about CNY 830 billion. Significant acceleration in infrastructure investment, coupled with the implementation of the national RRR cut policy, has led to the growth of demand for commodities such as steel. However, China's reaction to trade policies introduced by the new US administration, coupled with the country's efforts to reduce emissions, could add uncertainty to steel demand.
Key downstream sectors and steel demand
In 2021, production and sales of automotive vehicles in China amounted to 26.082 million units and 26.275 million units, respectively up 3.4 % and 3.8% Y-o-Y, ending the downtrend seen in the three years, based on data from the China Association of Automobile Manufacturers (CAAM). But at the same time, the association also indicated that semiconductor shortages may undermine car production.
China's steel demand in 2022 would slip further to 947 million tonnes in 2022, down 0.7% Y-o-Y, China Metallurgical Industry Planning and Research Institute (MPI) made the forecast in its report on China's steel demand.
By 2022, it is estimated that the demand for steel will continue to grow in the shipbuilding sector. However, for sectors like home appliances, automobiles, machinery, bicycles, and motorcycles made of steel, the demand for steel is expected to fluctuate slightly.
In 2021, car production in the US amounted to 18.74 million units, a 20.08% decrease Y-o-Y, and a 22.74% decrease in 2020 from 30.3489 million units in 2019, according to data released by the Federal Reserve. The decline in 2021 US auto production is smaller than in 2020, showing the robust recovery of the country’s auto sector after the pandemic.
The American Steel Manufacturers Association applauded the passage that U.S. Congress will likely pass an infrastructure bill that will focus on steel-intensive, traditional infrastructure to provide a tremendous boost to the US steel industry, especially for long products. However, semiconductor shortages could also prolong the automotive industry's demand for flat steel.
Worldsteel forecasts the US finished steel demand to grow by 8.1% in 2021 and 4.3% in 2022, aided by a strong recovery in the automotive industry and slowdowns in the non-residential construction and energy sectors activities.
In Q2 2021, apparent steel consumption and steel production in the EU continued to show a positive growth trend, much higher than in Q1 2021. On the one hand, the strong recovery in demand has driven steel and its downstream industries to rebound rapidly after the pandemic. On the other hand, as EU implemented a comprehensive lockdown in Q2 2020, industrial activities basically stopped, resulting in a larger Y-o-Y increase in 2021.
However, the recovery between the EU economy and industry appears to be increasingly uneven, mainly due to continued severe disruptions to global supply chains (i.e. shortages of parts and raw materials, soaring energy prices, rising shipping costs, etc.), as well as the slow implementation of vaccination in some EU countries. In Q1 2022, as the recovery of the downstream industries and steel demand remains uncertain, the correction of the global supply chain in the next few months requires further observation.
In Q2 2021, apparent steel consumption in the EU grew by 40.5% to 40 million tonnes, compared with 36.3 million tonnes in Q1 2021. EU apparent steel consumption fell sharply by 10.6% in 2020, following a 5.2% decline in 2019, as steel demand throughout 2020 was severely affected by the pandemic. In 2021, EU steel consumption rebounded sharply, increasing by 13%.
In 2022, EU steel consumption is expected to grow moderately by 4.7%, on track to return to 2017 levels, despite uncertainty over global supply chain disruptions affecting steel demand.
In South Africa, the entire steel industry has been under enormous pressure due to the lack of local infrastructure projects, high investment costs, and intense global price competition.
As for downstream demand, the local construction industry struggled during the COVID-19 lockdown, while the automotive industry went through supply chain disruptions, such as a global shortage of semiconductors. Statistics South Africa indicated that in 2021 Q1, the unemployment rate up to 32.6%, mainly in the construction sector, then followed by trade, transport, agriculture sector, and private household sectors.
To revitalize the local steel industry, in June 2021, the local government signed a USD 44 billion program: The Steel Master Plan 1.0, which focused on addressing both supply and demand and implementing AfCFTA (the African Continental Free Trade Area). Currently, the program already established a steel development fund to support critical industry projects.
The South African government has predicted its economy to grow by an average of 1.7 % over three years, it can be assumed that the automotive industry will also follow the upward trend and recover to the production level before the pandemic. However, the problems caused by the pandemic are still uncertain in the short term, which will continue to suppress production and slow down the recovery of the entire industry.
Steel demand in Africa will grow by 7.5% in 2022 and reach 42 million tonnes, as stated by The World Steel Association’s 2022 Short-Range Outlook.
Middle East North Africa region (MENA)
The MENA region’s infrastructure spending over the last decade has averaged just 3% of GDP, which has a quite large gap between what said by the World Bank that their infrastructure spending needs to be at least 8.2% of GDP by 2030. Especially since 2020, the impact of COVID-19 has stagnated many countries' economic development, which further limited investment in new residential construction and infrastructure projects.
In response, some countries in the region have already begun to stimulate steel demand in the construction industry:
The Housing Program Delivery Plan (2021-2025) is a key program of Saudi Arabia's Vision 2030, which aims to provide affordable houses for locals and may bring stable demand to domestic steel producers.
The UAE's construction industry is expected to grow at an average annual rate of 3.8% between 2022 and 2025.
Kuwait's FY 2021-2022 budget has a significant portion that will be spent on infrastructure construction projects.
Worldsteel forecasts MENA region's steel demand will grow by 6.5% in 2022, driven by increasing energy prices and government expenditure, which will keep boosting the demand.
Worldsteel Association used to forecast that CIS’s steel demand will grow by 3.2% in 2022, reaching 6.17 million tonnes. However, the sudden outbreak Russia-Ukraine war is bound to seriously affect the domestic and export demand of those two countries.
In 2020, the CIS region, mainly Russia, total exported 50.9 million tonnes of steel (including semi-finished steel products), among them, there are 12.9 million tonnes (25.3%) exported to the EU countries, mostly exported hot rolled long products and plates, and a large quantity of semi-finished steel products.
With the implementation of various sanctions against Russia, 70% of Russia's global business is affected by the disconnection of the SWIFT system, therefore in 2022, it will be more difficult to export Russian steel to Europe, the US, and other developed countries. Despite this, Russia's domestic steel demand will grow by 3% supported by the government's investment. MMK also said that government-supported steel demand from the 2021 H2.
2021 crude steel production increased by 3.6% to 21.4 million tonnes, pig iron production increased by 3.6% to 21.2 million tonnes, and rolled steel production increased by 3.5% to 19.1 million tonnes, only steel pipe production dropped by 15% to 980,000 tonnes.
Considering the situation of the Russian-Ukrainian war, most steel mills in Ukraine have all been shut down, at the same time, the steel price was boosted by resource constraints. Therefore, it is expected that both steel production and demand in Ukraine will drop significantly in 2022.
Vietnamese steel consumption increased by 30.6% Y-o-Y in the first six months of 2021, however, strict social distancing rules implemented in July had a significantly negative impact on domestic steel consumption and lead to sluggish domestic demand during the whole of July and August.
In contrast, the export market in the country has boomed since the beginning of the year. In the first eight months of 2021, the export volume reached 41 million tonnes, a Y-o-Y increase of 78.2%, and the export value reached USD15 billion, a Y-o-Y increase of 250%. The extreme growth is mostly driven by demand from the EU and North American markets recovered and rose strongly.
Due to the impact of the COVID-19 pandemic, even though the 2020-2021 public investment expenditure plan is at a record high compared to the average of the previous three years, actual expenditure was much lower than in previous years. The social distancing rules and the rising prices of construction materials affected many real estate projects that were postponed in H1 2021.
World Steel Association forecasts that Japanese steel demand will grow by 10.2% and 2.1% in 2021 and 2022, after the 16.8% decline in 2020.
In 2022, it is expected that the country's steel downstream sectors such as automobile and machinery manufacturing will likely show positive growth. The demand rebound will be strongly supported by the recovery in steel consumption and investment.
Part 3: Outlook for 2022
Global steel demand outlook
According to a report released by China Metallurgical Planning and Research Institute in December 2021 on the forecast of global steel demand: It is estimated that the global steel consumption will be 1.840 billion tonnes, a Y-o-Y increase of 3.7%; in 2022, the global steel demand is expected to be 1.876 billion tonnes, a Y-o-Y increase of 2.0%.
Worldsteel has also expressed a positive forecast. Edwin Basson, Director General of the association, said in his 2022 New Year's message that global steel demand showed stronger than originally expected recovery in 2021 based on increased vaccination rates and government measures to support the control of the pandemic. As a consequence, steel demand is expected to grow by 2.2% to 1,896.4 million tonnes in 2022, continuing the recovery momentum.
Global steel production outlook
On the supply side, however, while global steelmakers have gradually recovered from the pandemic-induced shutdowns in 2021, the current global supply of steel is still far below pre-pandemic levels. In addition, the current Russian-Ukrainian crisis has caused Ukrainian steel manufacturers, the second-largest steel-producing country in the CIS, to suspend production. At the same time, Russia, as the largest steel producer in the CIS, the fifth-largest steel producer, and the second-largest steel exporter in the world, may find it difficult to export steel products to major destinations such as Europe, North America, etc.
For Russia and Ukraine, the war itself is cutting off global steel supplies. The suspension of the two economies' participation in trade activities is expected to shrink global steel production by about 25 million tons, accounting for about 6.54% of steel exports across the globe.
Based on the above, the global steel supply is expected to remain tight in 2022, maybe difficult to return to pre-pandemic levels in the next few months.
Global steel price outlook
In the current period of short supply, it is expected that steel prices are likely to maintain an upward trend in 2022. In addition, given that the overall supply and demand performance of the global steel market is currently better than in 2020 and 2021, CUMIC expects that the outlook for the global steel market in 2022 will remain optimistic and steel prices will gradually stabilize.
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