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Top steelmakers 2020 edition

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Right now, most steelmakers will have much more on their minds than how their total annual steel production figure compares with those of their peers, as the impacts of the Covid-19 crisis on ferrous production facilities from iron ore mining and scrap processing to finished steel products and end-user markets reverberate globally. The quality, efficiency and profitability of their production, as well as the accessibility of export markets, are to the fore today. Nevertheless, Fastmarkets’ latest list of the world’s largest steelmaking companies, based on steel output in 2019, continues to provide an interesting annual snapshot of the evolving geographical pattern of global steel production. In addition to the table itself, in the pages that follow a team of six of our global steel writers have provided reviews of the big trends and developments in their major steelmaking regions as well as comments on the outlook.

ASIA

China’s Baowu Iron and Steel became the world’s largest steelmaker in 2019, displacing Luxembourg-headquartered ArcelorMittal, which had held the position since its formation in 2006.

This is the first time that a Chinese steelmaker has topped the rankings despite the country accounting for over half of global crude steel output. Baowu's output surged by 25.69 million tonnes to 93.12 million tonnes in 2019. The steelmaker's production was boosted by a state-sanctioned merger with Maanshan Iron and Steel Group and its acquisition of Chongqing Steel. Baowu also took a minority stake in Shougang Group, which is ranked eleventh in Fastmarkets' table, with an output of 27.34 million tonnes.

China's second-largest steel producer, Hesteel Group, retained its No.4 global ranking, although it saw a 234,700 tonnes decrease in output during 2019 to 44.66 million tonnes.

Jianlong Group jumped two spots to cement its place in the top 10 after its output rose 3.3 million tonnes to 31.19 million tonnes.
Chinese mills are likely to march up the rankings in future editions of Fastmarkets' annual tally as the Chinese government embarks on its goal of consolidating 60-70% of domestic steel production within its ten largest groups by the end of 2020. This move is part of the Chinese government's plan to tackle a supply glut in the Chinese steel market by increasing the market share of its state-owned entities to improve the industry's competitiveness.

The China Iron and Steel Association expects Chinese steel consumption to reach 890 million tonnes in 2020, a slower year-on-year growth rate of 2%, compared with the forecasted 6% increase in 2019.

Steel output in Asia continued on an upward trajectory, led by gains in China, India and Vietnam, which bucked a downward trend in other parts of the world.

Global crude steel production rose 3.4% year on year to 1,869.9 million tonnes in 2019, from 1,808.4 million tonnes in 2018, according to the World Steel Association. China's output climbed 8.3% year on year to 996.3 million tonnes in 2019, from 920 million tonnes in 2018, Worldsteel reported. China's output alone accounted for 53.3% of crude steel production worldwide.

India’s output climbs too

India's crude steel output rose 1.9 million tonnes to 111.2 million tonnes in 2019, second behind China, according to Worldsteel data. The South Asian country aims to produce 300 million tonnes of crude steel annually by 2030, according to the Indian Steel Association.

Tata Steel retained its ninth-place spot after its output grew 1.37 million tonnes to 30.56 million tonnes. It plans gradually to shift its steelmaking operations back to India and has set a target to produce 32 million tonnes per year by 2025.

Steel Authority of India advanced one spot to 18th with an output of 16.15 million tonnes, while JSW Steel slipped one notch to 19th, having seen its output decline by 630,000 tonnes to 16.06 million tonnes. Jindal Steel and Power hurdled eight positions to the 50th spot after growing its output by 870,000 tonnes to 8.17 million tonnes.

In East Asia, the rankings for Japanese and South Korean steel majors were largely unchanged. Japan's Nippon Steel Corporation held on to its position as the world's third largest steelmaker with output of 47.05 million tonnes, while JFE Steel fell two spots to 10th after its production decreased to 29.79 million tonnes. Both mills have announced stoppages of multiple blast furnaces across Japan in 2020 due to challenging market conditions both domestically and abroad.

Japan's crude steel production fell 4.8% year on year to 99.3 million tonnes in 2019, from 104.3 million in 2018, Worldsteel data showed. South Korea's Posco remained the world's fifth largest steelmaker with an output of 42.9 million tonnes, while Hyundai Steel retained its 15th place.

Southeast Asia's growth

Fueled by the overseas expansion of East Asian steelmakers, production capacity in Southeast Asia is set to grow dramatically in the next few years. Vietnam in particular has experienced a rapid development in its steel industry and was ranked 14th globally in terms of crude steel production in 2019.

The country's steel output soared by 29.7% year on year to 20.1 million tonnes in 2019, from 15.5 million tonnes in 2018, Worldsteel reported. Taiwanese and Japanese-backed Formosa Ha Tinh Steel Corporation and local enterprise Hoa Phat Group are the two biggest steel mills in Vietnam.

Chinese-owned plants PT Dexin Steel Indonesia and Malaysia's Alliance Steel have also begun operations in recent years. Additional Chinese-backed greenfield projects are also being planned in the Philippines, Malaysia and Myanmar.

Ken Kiat Lee

NORTH AMERICA

The year 2019 could best be described as a year in which the US steel market normalized after its Section 232 tariff-related spike the year before. While it was not as strong a year as 2018 had been, hampered by slipping end-use demand, inventory destocking and the idling of production capacity at several integrated mills, it was a far less challenging year than 2020, with the combination of the novel coronavirus (Covid-19) pandemic and falling energy prices forcing most US steelmakers into survival mode. There is some hope that with the easing of certain restrictions applied to counter the virus that business conditions could start to slowly improve towards the end of the year.

John Anton, associate director of IHS Markit’s pricing and purchasing service, said it is important to note that 2019 was still a very solid, profitable year for US steelmakers. The year 2018 had been something of an aberration – unsustainably strong, largely because of the impact of the Section 232 import tariffs that were put into effect in March 2018 and which, according to Christopher Plummer, managing director of Metal Strategies Inc., continued to have a big impact upon the steel market throughout 2019 and into 2020.

There were concerns about how the tariffs would affect availability, accelerating the aggressive steel restocking that had already begun in 2017, especially when hot rolled coil (HRC) prices peaked at $924 per short ton. That, noted John Tumazos, president and metal analyst of John Tumazos Very Independent Research, resulted in steelmakers restarting some previously idled capacity as well as an inventory bubble. “The steelmakers believed that the tariffs were going to make their lives nirvana, so they began to produce too much,” he explained.

High production levels, Tyler Kenyon, a metals and mining analyst with Cowen & Co., pointed out, prompted the market to engage in destocking on the back of the drop-off in steel pricing that started late in 2018 and continued through 2019.

Anton said it could be argued that some mills’ decisions to restart steelmaking capacity late in 2018 and early 2019 were done “in the glow of the Section 232.”

Tumazos pointed out that many of the restarts were by integrated producers, including JSW (which is No. 19 on Fastmarkets’ latest top steelmakers ranking) reopening the former Wheeling-Pittsburgh Mingo Junction, Ohio, facility, and United States Steel Corp.
(No. 25) restarting its Granite City, Illinois, facility.

At the same time, many US electric arc furnace (EAF) steelmakers made announcements in 2019 to either expand their existing facilities or to build greenfield mills over the next few years. Plummer said that some of the mills that have announced, finalized or even begun construction on such projects, include Nucor Corp. (No. 14), Steel Dynamics Inc. (No. 44), North Star BlueScope (whose parent BlueScope Steel Ltd. is ranked No. 66) and Big River Steel.

Some of this capacity is expected to displace a combination of imported steel and integrated steel capacity. While even more such moves occurred this year due to the combination of the impact of the Covid-19 pandemic and plummeting energy prices, Kenyon said that, starting in the second half of 2019, some higher cost US blast furnace capacity began to exit the market, including the temporary idling of blast furnaces at US Steel’s Gary Works and Great Lakes facilities. US Steel announced in December that it would indefinitely idle a significant portion of its Great Lakes Works in 2020.

Also, ArcelorMittal took down the No. 3 blast furnace at its Indiana Harbor facility and AK Steel Corp. (No. 73), which has been acquired by Cleveland-Cliffs, shut down its Ashland Works in Kentucky.

Anton said that it is not surprising that there were a few major merger deals, or potential mergers, announced last year. “This is an industry that always first consolidates and then builds more capacity. It likes to first breathe in and then breathe out.”

Kenyon said that while Cliffs’ acquisition of AK Steel caught a lot of people off guard, he believes it was prudent as it could make AK Steel a more viable steelmaking enterprise by becoming vertically integrated with its one iron ore power source.

U.S. Steel’s acquisition of a 49.9% share of Big River Steel, with the likelihood that it will eventually acquire the remaining share of the company, was also somewhat surprising, Plummer said, although it fits with U.S. Steel’s “best of both” strategy to have both integrated and EAF facilities in its production mix.

“The outlook for 2020 is torrid,” Kenyon said, both because of the Covid-19 pandemic and weakness in such steel end-use markets as energy, automotive and construction and operating rates for steel production in the US falling to about 53% as of mid-May. “And steel demand is not going to come back quickly,” Anton said. “People who have been unemployed for several months will not be likely to buy a new car or appliance.”

Myra Pinkham

LATIN AMERICA

The Latin American steel industry is poised to face a difficult year with sharp cuts in production in 2020, after seeing its output and sales decrease in 2019.

The region’s steel association, Alacero, cut its forecast for 2020’s production to 53.70 million tonnes, compared with a previous forecast of 55.40 million tonnes, and down by 16.50% from 2019’s level of 60.07 million tonnes. It is the second consecutive cut in projections this year, according to Alacero, as the market becomes increasingly cloudy owing to Covid-19.

“Every time we reassess our forecasts, the outlook is worse than before,” the association’s general director Francisco Leal told Metal Market Magazine. As Latin America has become a new epicenter of the disease, the forecast for the steel industry in its nations varies according to each country’s response to the pandemic.

Chile has one of the region’s best outlooks, with a decrease in production estimated to reach only 5% this year. “In Chile, measures to contain the spread started early, while the steel sector was considered essential very early on,” Leal said.

Meanwhile, in Brazil, steel output is expected to fall by 20% this year, compared with the previous year, according to the Latin American Steel Association, Alacero. In Argentina, the current forecast is of a decrease of almost 30% from the previous year, Alacero said. In Mexico, the association expects steel production to decrease by 14.70% this year.

The automotive industry, one major steel-consuming sector, reduced production to a near halt in late March in Latin America’s three main producers, Argentina, Brazil and Mexico. In most countries, a gradual restart is being planned for late May and early June.

By early May, a total 12 blast furnaces in Brazil were halted because of the weak performance of end-user sectors, according to national steel association Aço Brasil. “The Brazilian manufacturing industry is in the intensive care unit,” Aço Brasil executive president Marco Polo de Mello Lopes said in early May.

In Mexico, the steel industry was considered essential by a government ruling, but authorized to continue operations only at a minimum level necessary to secure the continuity of businesses.

In Argentina, steel plants in the long steel segment were unable to produce because of a government lockdown that started on March 20. Blast furnace production, however, was allowed to continue, albeit at minimum levels. On May 23, the Argentinian government decided to extend the lockdown until June 7, from previously May 24.

The decrease in Latin American steel production this year comes at a challenging time for the Latin American steel industry. In 2019, steel production fell by 9%, from the previous year’s level of 65.56 million tonnes, while steel consumption fell by 5% to 64 million tonnes.

Last year, a series of major blast furnace revamps and maintenance works was carried out in Brazil, which led to a reduction in steel production. In the second half of 2019, ArcelorMittal Brazil made a 70-day revamp at one of its blast furnaces in its Tubarão slab and hot-rolled coil facility in the country’s southeastern Espírito Santo state. By late 2019, the company decided to keep the equipment stopped until market conditions improve.

Gerdau (No. 31) also made a maintenance outage in Brazil in early June, while Companhia Siderúrgica Nacional (No. 94) made a maintenance stoppage from July to October 2019.

In Mexico, it became known in June 2019 that Altos Hornos de México (Ahmsa) (No. 93) had stopped one blast furnace for maintenance, which was also motivated by the slow market.

Mexican and Brazilian companies were ready to enhance supply to the domestic market after the recent investments and blast furnace revamps, but such plans are now being put on hold. For example, Latin American steel group Ternium (No. 29) has decided to delay start-up of a hot-rolling mill in Pesquería, a northeastern Mexican city near Monterrey, Mexico, to April 2021, from previously the fourth quarter of 2020.

“Latin America was already in crisis when the Covid-19 started spreading, so the current crisis hit us amid other challenges,” Leal said. Nevertheless, the current steel performance in China is seen as a positive sign for Latin American steel. “As China has been the first country to report a fast V-shaped recovery in the economy, we believe we may see the same in Latin America,” Leal said.

He believes exports could be a lifesaver for the region’s steel industries, and claims that governments should stimulate them. In Brazil, some steelmakers have been saying that a recent loss of value of the domestic currency could help them boost exports and compensate for a weaker domestic demand. But with most international markets also affected by the pandemic, such a move might prove more difficult than expected.

In April, a total 141,808 tonnes of flat steel products were exported from Brazil, a reduction from 160,575 tonnes in the same month in 2019, according to figures from the country’s economy ministry. The United States was the main market for Brazilian flat steel, with 27,639 tonnes in April, up from 1,945 tonnes a year earlier.

“Most of the usual trade partners of Latin American countries are also at a standstill,” Leal said.

Felipe Peroni

EUROPE

In 2019 into early 2020, European steelmakers managed to break the negative price trend by introducing planned production cuts, which were made to balance demand and supply. Flat steel prices started to rise in early 2020, supported by production cuts, seasonal re-stocking and lower interest in imported steel products. The price recovery, however, was short-lived as the impact from Covid-19 lockdown measures across Europe has hit the entire steel distribution chain and European producers had to drastically cut production further and idle some equipment in response to the slump in demand in the second quarter of 2020.

Long steel producers have resumed their operations after lockdown measures in some European countries were eased in April-May this year, but they have been running at reduced capacities according to the estimations of market participants.

In the meantime, flat steel mills face a severe decrease in consumption from the automotive industry and other end-users and, as a result, the majority of the temporarily stopped equipment remained idled in the second half of May.

New car sales in Europe dropped by 38.54% year on year to 2,750,845 units in January-April 2020, according to data released by the European Automotive Manufacturers Association (ACEA). This followed a 1.19% year on year recovery in full-year 2019, when total car sales reached 15,340,188 units.

In March this year a number of automotive manufacturers in Europe announced temporary production shutdowns at sites across Europe because of the problems created by the measures taken by governments to restrict the spread of Covid-19. Some car manufacturers have stopped operations again, after a brief restart when Covid-19-related lockdowns were eased, due to weak demand for cars.

Fastmarkets’ daily steel hot-rolled coil index, domestic, exw Northern Europe, was €409.17 ($448.58) per tonne on May 22, 2020, down from the weekly price assessment of €480-490 per tonne ex-works on May 22, 2019. Prices started to recover in late November last year and the recovery ended in early March when Covid-19 started to spread in Europe and lockdown measures taken by the authorities resulted in a drop in consumption and production pauses.

The European steel market will not recover from the drastic drop in demand caused by the measures to combat the spread of Covid-19 until late-2020 to early-2021, according to the forecast of the European steel association Eurofer. EU apparent steel consumption fell 5.3% year on year to 154 million tonnes in 2019, Eurofer said.

The majority of European steelmakers, including ArcelorMittal, Thyssenkrupp, Salzgitter, SSAB and Celsa, saw a decrease in crude steel output in 2019.

Global ArcelorMittal earnings before interest, taxes, depreciation and amortization (Ebitda) plummeted by 52.59% year on year to $925 million in full-year 2019. In early-July 2019, ArcelorMittal had sold a number of its assets, including: a steel plant in Ostrava, Czech Republic; the Galati mill in Romania; the Skopje facility in Macedonia; the hot-dipped galvanized steel production plant in Piombino, Italy; and finishing lines at Dudelange in Luxembourg, and at Liège in Belgium, to Liberty House. The sales were part of the divestment package agreed with the European Commission for ArcelorMittal's acquisition of Italian flat-rolled steel producer Ilva, which was finalized a year earlier.

In November 2019, a year after the deal for the ex-Ilva plant was made, ArcelorMittal nearly pulled out after Italian authorities removed immunity from prosecution from ArcelorMittal for excessive plant emissions that could not be reduced until the environmental plans for the big integrated plant were implemented. As part of the original agreement, ArcelorMittal was granted immunity from prosecution for the excessive emissions that could not be reduced until the environmental plan was fully executed, which was scheduled to be finalized by the end of 2023. ArcelorMittal and Italian authorities reached an updated agreement in early-March 2019. As part of the new arrangement, the company will continue to run the ex-Ilva plant and a new direct-reduced iron facility and an electric-arc furnace will be built to replace blast furnaces currently operating at the plant.

German industrial group Thyssenkrupp has detailed its restructuring plan, confirming its intention to sell shares in its steel business and sell or close its heavy plate sites. The plan was made after the European Commission blocked creation of a joint venture between Thyssenkrupp and Tata Steel in June 2019. The Commission determined that the merger would have reduced competition and increased prices for various types of steel products and that the steelmakers had not offered adequate remedies to address those concerns.

Pressure from imported steel remained a key negative factor in the European market in 2019, but the volumes have since dropped and import prices have been comparable with domestic prices in Europe at the beginning of 2020.

Total imports of steel products into the EU, including semi-finished products, were down by 24% year on year in the fourth quarter of 2019, according to Eurofer data. For the full year 2019, steel imports decreased by 11.5% year on year, but this decline followed a 12% year-on-year rise in imports in 2018.

This, however, has not stopped the further toughening of trade barriers in Europe. The European Commission initiated a second review of the existing safeguard measures into a variety of imported steel products in mid-February 2020. This regular procedure allows authorities to evaluate if measures in place are sufficient to protect the European market.

Eurofer has requested a 75% cut to the quotas due to reduced production in Europe and injury that the import rise might cause to the EU industry. Market sources, however, expect the quotas to be reduced by about 50%. Any decisions that emerge from the review will come into force on June 30.

The European Commission also started an anti-dumping investigation into hot-rolled coil originating from Turkey in the middle of May 2020. Provisional measures, if any, are scheduled to come into force by December 15 this year. Europe already has anti-dumping duties on hot-rolled coil from China, Russia, Ukraine, Brazil and Iran.

The impact of the proposed toughening of safeguard and anti-dumping measures is likely to support the recovery of domestic prices, according to market sources. The measures alone, however, will not be enough to result in revival of production and prices in Europe.
 
Maria Tanatar

CIS

In 2018, steel demand in Russia, which generates around two-thirds of steel consumption in the Commonwealth of Independent States (CIS), came in stronger than expected, resulting in lower exports from the region.

Steel consumption in Russia increased by 8% in 2019, according to Novolipetsk Steel, the largest steel producer in the country. Meanwhile, the World Steel Association (Worldsteel) estimated that steel demand would increase by 5% in 2019, to 43.2 million tonnes, compared with 41.2 million tonnes in 2018.

Overall, steel consumption in the CIS was expected to be 58 million tonnes in 2019, Worldsteel said in its short-range outlook released in October last year – an expected 4.8% increase in steel usage in the region year on year.
Exports
Russia accounts for about 60% of CIS steel exports, although Russia’s steel producers remain focused on the local market. In contrast to Russia, Ukraine, which provides about 30% of CIS exports, historically is an export-oriented country due to low steel consumption on the country’s domestic market.

Better local demand in Russia resulted in its steel producers cutting exports by more than 14% year on year in 2019. Russia shipped 22.4 million tonnes to foreign customers, according to the International Steel Statistics Bureau (ISSB), down from 26.1 million tonnes a year before.

Hot-rolled coils account for the largest proportion of exported finished steel products from the CIS. Shipments of those from Russia dropped to 2.89 million tonnes in 2019, from 3.65 million tonnes in 2018, according to ISSB.

Fastmarkets’ price assessment for steel hot-rolled coil, export, fob Black Sea, CIS, averaged $461.23 per tonne in 2019, falling by more than 16% from $550.57 per tonne in 2018. Meanwhile, the average assessment for steel hot-rolled sheet, domestic, cpt Moscow, Russia in dollars was $688.82 per tonne in 2019, up by 6% from $621.86 per tonne a year before.

Steel exports from Ukraine increased to 13.1 million tonnes in 2019, up from 12.7 million tonnes in 2018. That reflected lower apparent steel consumption in Ukraine, which declined by 4.0% to 5.5 million tonnes in 2019, from 5.7 million tonnes a year before, according to Metinvest.

Output

In 2019, steel output in the CIS region was almost unchanged at 101 million tonnes, according to Worldsteel. In Russia, steel output was almost stable at 71.73 million tonnes, compared with 71.68 million tonnes a year before.

NLMK, which slid in Fastmarkets' global Top Steelmakers ranking to 21st position in 2019 from 17th place in 2018, reduced steel output by 10% year on year, to 15.7 million tonnes, owing to major repairs of blast furnace No.6 at NLMK’s Lipetsk site and steelmaking operations.

Meanwhile, Evraz – another major steelmaker in Russia, which rose to 26th position from 28th a year before – increased steel output in Russia by 9% to 11.95 million tonnes, amid completion of repairs of blast furnaces at its West-Siberian Metallurgical Plant.

The drop of steel output at NLMK was partly offset by the start-up of a new mill – Tula Steel, a partner project of Russian Industrial Metallurgical Holding, in July 2019. The steelmaking equipment at Tula Steel includes a 1.6-1.9 million tpy basic oxygen furnace and a 1.5 million tpy continuous casting machine, but the company has not been operating at full capacity.

In Ukraine, the second largest steel-producing country in the region, steel output was 20.8 million tonnes in 2019, slightly down from 21.1 million tonnes a year before.

Outlook

In 2020, steel consumption in the CIS was expected to increase to 59.2 million tonnes, compared with 58 million tonnes expected in 2019, Worldsteel noted in October 2019.

The growth was mainly related to expected market improvement in Russia, where finished steel products demand was expected to be 43.9 million tonnes in 2020, which would be up by 1.5% compared with 43.2 million tonnes in 2019.

But according to NLMK’s latest forecast, the company foresees steel demand showing a double-digit drop in Russia in 2020 due to quarantine measures and an economic slowdown caused by the Covid-19 pandemic.

“In Russia, our current forecast for 2020 overall is at least 15% lower demand year on year, but that accounts on quite a strong first quarter,“ chief executive officer Grigory Fedorishin said. Lower domestic demand will force NLMK to increase exports. NLMK forecasts that the share of its sales that goes to export will increase to 72% in May, compared with 54% in March and 52% in February.

International shipments from Ukraine are also likely to increase on higher HRC output. Metinvest finalized the reconstruction of a hot strip mill at its Ilyich site in November 2019 and its testing period should come to an end in May. The rolling-mill capacity is now 2.5 million tpy, an increase in capacity by 1 million tpy on its level before reconstruction.

“With the reconstruction of the Ilyich strip mill we want to regain our share of the global HRC market, and we plan to reach back to 4.5% of the total amount of internationally traded HRC [in 2020],” Metinvest's sales director Dmitriy Nikolaenko said in November 2019.

Marina Shulga

MIDDLE EAST

Middle Eastern crude steel production reached 42,879,000 tonnes in 2019, 20.5% more than the 35,582,000 tonnes produced in 2019, according to the World Steel Association.

The increase in total production was mainly because of a sharp increase of production in Iran, which produced 31,900,000 tonnes of crude steel in 2019, 30.1% more than the 24,520,000 tonnes the country produced in 2018.

The economics of the Middle East region depend heavily on oil, but oil prices have been decreasing sharply since the Covid-19 pandemic began because of its impact on lowering oil consumption globally. So some countries in the region, mainly Saudi Arabia, have taken measures to avoid further losses.

The WTI oil price was $33.56 per barrel on May 22, just over half its level of $63.05 per barrel on December 30, 2019, but it hit as low as $16.94 per barrel on April 20, 2020.

The Iranian steel market has kept strong so far in 2020 as well, with the country producing 8.49 million tonnes of crude steel in January-April 2020, 4.3% more than the 8.139 million tonnes the nation produced in the same period of 2019.

International tensions remain, however, with the United States tightening sanctions on Iran at the beginning of 2020, after ballistic missiles were fired at military bases housing American forces early on January 8, in response to the killing of top Iranian military general Qasem Soleimani via a US drone attack in the previous week. US President Donald Trump in turn promised to tighten economic sanctions against Iran and targeted 17 Iranian metal producers and mining companies, as well as other foreign entities, with fresh sanctions on January 10.

Covid-19 pandemic impacts

The Covid-19 pandemic has affected Middle Eastern steel production and consumption significantly.

Saudi Arabia announced curfews in the cities of Riyadh, Tabuk, Dammam, Dharan and Hofuf, and in the provinces of Jeddah, Taif, Qatif and Khobar, commencing on the night of April 6, but eased them on April 26. The same measures were also imposed on the governorates of Jeddah, Taif, Qatif and Khobar.

There was also a nightly curfew order in the United Arab Emirates. The authorities in Dubai announced a lockdown for a period of two weeks starting on April 4, with people only allowed to leave their homes to shop for food or medicines. No trucks carrying anything other than food or medicine were allowed into Dubai, which is the biggest consumer of steel in the UAE.

While there are no steel producers in Dubai itself, the lockdown will have had a negative effect on steel consumption in the country, sources said.

In Kuwait, another Gulf Co-operation Council (GCC) member, the government announced a full lockdown in the districts of Mahboula and Jleeb Al-Shuyoukh, and extended a public holiday by two weeks until April 26, because of the Covid-19 pandemic. The country also has a curfew in place from 5.00pm until 6.00am.

Oman’s capital city Muscat was on lockdown from Friday April 10 because of the pandemic. The remaining GCC members, Qatar and Bahrain, have not announced any curfews or lockdowns at the time of writing.

By late February, Iran’s steel export trade was impacted by neighboring countries closing their borders due to the appearance of coronavirus infections in the country. Despite this, the country had big market shares in Southeast Asia and GCC countries for its billet exports. Iranian exporters sold 10.36 million tonnes of steel products in the official Iranian year (to March 19, 2020), up 22.21% on the previous year, according to the Iranian Steel Producers Association.

Saudi Arabia’s Ministry of Finance decided to increase the value added tax (VAT) rate to reduce the impact of the Covid-19 pandemic in the country. The VAT rate in Saudi Arabia will increase to 15% – up from the current 5% – from July 1, 2020. Saudi Arabia initially imposed a 5% VAT rate from January 1, 2018, alongside the United Arab Emirates (UAE), for the first time in the history of the two countries.

In a separate development, the UAE Ministry of Economy announced a ban on exports of ferrous scrap for a period of four months starting on May 15, 2020. The ban affects scrap under seven HS codes.

While the ministry did not give an official reason for implementing the export ban, market participants in the UAE told Fastmarkets that the decision was taken to avoid price hikes in the local market. The main scrap consumers in the UAE are Emirates Steel, Arabian Gulf Industries, and Shattaf Steel.

The scrap export ban for UAE material could generate an increase in scrap prices in India by reducing that country’s supply, because the UAE is the largest contributor of ferrous scrap imports to the country.

India imported 1,025,058 million tonnes of UAE scrap in 2019, according to statistics from the International Steel Statistics Bureau, equating to 18.3% of the total 5,607,766 million tonnes India imported last year. Pakistan is another major buyer of UAE-origin scrap.

Diversifying and adding value

Steel production in the Middle East is mainly of long, rather than flat, products. Steel consumption in the region consequently decreases significantly when there are no construction projects. Middle Eastern steel producers need to diversify their product lines to survive weakening demand in the region, according to Saeed Ghumran Al-Remeithi, the chief executive officer of the United Arab Emirates’ biggest steelmaker, Emirates Steel.

Al-Remeithi said in his opening speech at Fastmarkets’ Middle East Iron & Steel Conference in Dubai on December 10, 2019 that 90% of steel production among Gulf Cooperation Council (GCC) nations was confined to long steel and only 10% to flat steel because of a dependency on construction. Saudi Arabian steel producer Hadeed Sabic is the only hot-rolled coil producer in the GCC.

Amid the current weakness in the construction sector, producers should focus more on value-added products and diversify their production, Al-Remeithi noted.

Emirates Steel, a direct-reduced-iron-based integrated steelmaker, counts rebar, wire rod and sections among its finished steel products. Although it had announced plans back in 2011 to invest in hot-rolled coil production, the investment remains on hold.

Al-Remeithi told Fastmarkets on the sidelines of the conference last year that the HRC production plan had not been cancelled. A feasibility study on the greenfield project, which would be located in the UAE, continues, he said, but he did not specify any timetable. Al-Remeithi also noted the importance of the mill’s facilities being close to downstream sectors. Construction projects, most of which are government-linked, account for most of the steel consumption in the GCC region, he said.

One of the main challenges facing the Middle East steel sector is a lack of trade protection in an industry where protectionism is increasing internationally, according to Abu Bucker Husain, chief executive officer of United Arab Emirates-based galvanized coil producer Al Ghurair Iron and Steel.

North America, South America, Europe and Asia have taken protectionist measures to curtail imports, and this opens up the Middle East, especially Gulf Cooperation Council nations, to being a dumping ground for exports, Husain said at Fastmarkets’ Middle East Iron and Steel Conference in Dubai on December 11, 2019.

“In the last ten years, the Middle East is the only region other than Asia whose percentage contribution to global steel production has increased, according to the World Steel Association,” Husain said. Because of the increasing protectionism, excess capacities in China and India are being redirected to the Middle East,” he added.

“To improve the steel sector in the Middle East, we need some nurturing of the domestic industry, in addition to regional stability and peace. Furthermore, infrastructure development, reconstruction [in Iraq and Syria], and stable oil prices, as well as diversified economies independent from oil in the region,” Husain said.

Global overcapacity causes steel prices to fall, so governments should only approve new capacities if there is need, Ankur Dana, chief executive officer of Dubai-based multinational Dana Group, said at Fastmarkets’ Middle East Iron and Steel Conference in Dubai on December 11, 2019.

“If we compare the estimated demand for finished steel products in 2035-40 with existing installed capacities, we can very safely say there is already enough capacity installed globally today to satisfy demand for the next 20-plus years,” Dana noted.

In addition, governments in the Middle East should allow imports only when regional capacities are not able to meet demand and consumption, Dana said, noting that supporting locally approved products and brands will help to avoid cheap imports.

Duty changes and investigations

Middle Eastern governments took several measures to protect local production against cheaply priced imports in 2019.

The GCC countries started a safeguard investigation on several steel products in October 2019. The investigation covers the period from January 2014 to June 2019 and focuses on hot-rolled flat products, rebar, wire rod, sections and welded and seamless pipes. However, that investigation has not been finalized at the time of writing.

The GCC nations increased import duty on rebar and wire rod to 10% from the previous 5%, with effect from January 1, 2019. The duty increase applied to imports into all GCC countries.

In October 2019, Egypt announced definitive safeguard duties on rebar and billet. Originally, the duty was 16% of the cif price and a minimum of $74 per tonne for steel billet from October 12, 2019 until April 11, 2020. The duty then fell to 13% and $60-per-tonne minimum payment on April 12, 2020 until April 11, 2021, and is due to change to 10% and $46-per-tonne minimum payment on April 12, 2021 until April 11, 2022.

For steel rebar and wire rod, originally the safeguard duty was 25% of the cif price and a minimum of $125 per tonne from October 12, 2019 to April 11, 2020; 21% and $105-per-tonne minimum payment from April 12, 2020 to April 11, 2021; and will be 17% and $85-per-tonne minimum payment from April 12, 2021 to April 11, 2022.

However, in April 2020, the Egyptian Ministry of Trade and Industry actually postponed the duty reduction on billet and rebar for a period of six months until October 12, 2020. Tariq Shalabi, Assistant Minister of Industry and Trade for Foreign Trade Affairs, said the decision to postpone the reduction of duties was because of the Covid-19 pandemic and its negative effects on the Egyptian and global economy.

In addition, early in May 2020, the Egyptian parliament requested the government add a 10% import duty on finished steel products to protect local steel production. The government has not yet approved or rejected the proposal but, if accepted, flat steel producers will benefit from the new duties, sources said.

The Middle East and North Africa region has a couple of steel industry capacity increases in the pipeline. Tosyali Algeria plans to start production of hot-rolled coil by the end of 2022 and is targeting output of 2 million tonnes per year. The company currently has long steel production capacity of around 3 million tpy and rolls mainly rebar and wire rod.

Moon Iron and Steel (Misco) started production of billet at its facility in Sohar, Oman, in the week starting March 30. Misco has an electric arc furnace, ladle furnace and a five-strand continuous billet caster with a production capacity of 1.2 million tonnes per year.

Serife Durmus

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