Record prices breathe life into the steel industry; India to increase capacity, Auto News, ET Auto
Prices have exploded around the world this year, breaking record after record. Roaring industrial demand is propelling these gatherings, with factories scrambling to boost supply after sleeping during the pandemic. On top of that, the Chinese and Russian powers are trying to limit exports to help other industries in their countries.
“If you had asked me six months ago what was my most positive vision for the first half of 2021, I don’t think I would have even come close to reality”, Carlo Beltrame, who manages Romania and France for AFV. Beltrame, said in a telephone interview. The closed company plans to build a 250 million euro ($ 295 million) plant in Romania with a production capacity of around 600,000 tonnes per year.
Steel prices have jumped around the world this year
This optimism is a far cry from the past decade, when Western manufacturers closed factories and laid off workers as weak demand had their factories operating below capacity. Last year alone, 72 blast furnaces were inactive, according to UBS Group AG.
This year, US President Joe Biden wants to spend on infrastructure, and the European Union wants to spend to achieve net zero emissions. Manufacturers such as Nucor Corp., US Steel Corp. and SSAB AB are among those on the way to profit making machines. ArcelorMittal SA, the largest in the world outside of China, will earn more than McDonald’s Corp. or PepsiCo Inc., according to analysts’ estimates.
Few people expect these good times to last until 2022. Keybanc Capital Markets and Bank of America Corp. believe that the arrears driving up steel prices in the United States will begin to recede this year. But some analysts are predicting that the current recovery could herald better long-term times, with prices eventually settling to more sustainable levels than before.
âSteel industries outside of China will potentially enter a period of renaissance,â said Tom Price, head of commodities strategy at Liberum Capital Ltd. in London. “We might see a story of a turnaround there because these economies just need their steel.”
Developments in China are essential, given that it produces more than half of the world’s steel, mainly with coal-fired blast furnaces. The government has indicated that it is no longer willing to shoulder the enormous environmental burden that this entails, so it is seeking to curb production through measures such as strengthening guidance on capacity trading and the removal of tax rebates. export.
“Restrictions will almost certainly be put in place,” said Tomas Gutierrez, senior editor for Asia and data manager for Kallanish Commodities Ltd. “Steel workers abroad can sleep a little easier.”
Meeting the government’s target will be a challenge given China’s strong production at the start of the year, said Lu Ting, senior analyst at researcher Shanghai Metals Market. Yet other Asian countries are seeking to fill any gaps in supply.
The renewed focus on stimulus and infrastructure in the United States and Europe is also cause for optimism. Biden is determined to make new roads, railways and housing the mark of his tenure, while the EU is focusing on clean energy as part of the coronavirus stimulus package and the Green Deal.
It takes steel, and a lot. The infrastructure plan proposed by Biden would increase annual demand by around 5 million tonnes in the first five years, London-based consultancy CRU Group estimated. A bipartisan package would spend $ 579 billion if approved.
Still, only 4.6 million tonnes of planned capacity annually is expected to be commissioned in the United States by the end of 2022, said Andrew Cosgrove, analyst at Bloomberg Intelligence.
And even if demand increases, Western producers do not want to develop. US Steel CEO David Burritt told shareholders in April that the company has no plans to restart two blast furnaces that were shut down last year.
Cleveland-Cliffs Inc., America’s second-largest steelmaker, is preparing to demolish its plant in Ashland, Kentucky, as well as a blast furnace in Indiana Harbor West. CEO Lourenco GonÃ§alves said in April that these will never resume production as his goal is to pay off debt.
European producers are almost as reluctant to invest in new capacity after spending the last decade painfully downsizing. ArcelorMittal said in results calls that its top priority is shareholder returns.
This is in part due to fears that protectionist measures implemented by governments to support their ailing steel companies will not last forever.
But there is no sign of a change on this front, even with sky-high prices. Biden has still not repealed the tariffs on foreign steel imposed by former President Donald Trump, while the EU opted last month to extend its safeguard measures for another three years.
If anything, more support is on the way. The EU will eventually impose duties on imported steel as part of its Green Deal, and these will fall most heavily on carbon-intensive producers such as Russia.
Other countries could also fill the void created by China’s restrictive measures. India is set to increase capacity, with leading producer JSW Group saying it will meet its target of more than doubling capacity to 45 million tonnes by 2030. Southeast Asia, including Malaysia and Indonesia, plans to add an additional 60 million tonnes by the end of this period. decade, according to consultant Wood Mackenzie.
AFV Beltrame could start building its rebar and wire rod plant in Romania as early as this year. The plant will generate the lowest emissions of a steel production unit in the world, according to the company.
“I hope this super cycle will last a few more months,” said Carlo Beltrame. âWe need bricks, we need cement, we need steel. And we, as entrepreneurs, face the challenge of transforming this industry.