News on Steel

According to the latest data from the World Steel Association, worldwide production of crude steel totaled 127 million metric tons in April, down slightly from 129 million metric tons in March. In total, Asian countries produced 81.2 million metric tons of crude steel in April, down from 82.4 million metric tons in March. So far this year, Asian countries have produced 320.5 million metric tons of steel, 8.3 percent more than during the first four months of last year.

On the occasion of EUROFER’s first European Steel Day on 19 May in Brussels, the leaders of the European steel industry expressed their grave concern over EU Climate Change policy. The President of EUROFER said that European steel needs a level playing field in which legislation does not harm its competitiveness or that of the European economy. He said “EU climate change policy does not reflect the political agreement when the Directive was adopted in December 2008. Steel is making an important contribution to a more sustainable economy. In cooperation with its customers, the construction and the steel processing industries which represent best practice in manufacturing, the steel industry has developed solutions that help to meet the environment objectives set by the European Union. Light-weight steel applications have helped car manufacturers to produce lighter vehicles and therefore reduce CO2 emissions while maintaining high safety standards. The steel industry is also instrumental in developing energy efficiency solutions for the construction industry. Without steel, there can be no progress on the side of renewables or next generation high yield power plants. The recyclability of steel further allows a stronger recourse to secondary raw materials which again contributes to a more sustainable society. The steel industry strongly wants to continue to support continued investment and employment in Europe and is committed to the EU’s innovation agenda. It is crucial, however, that the right regulatory framework is created that supports competitiveness. We urge you to support our industry for growth and jobs in Europe”.

On 12 May in Paris, the Chairman of the OECD Steel Committee said that the outlook for the global steel industry is promising, with global demand forecast to increase by an annual 6% in both 2011 and 2012, but downside risks remain, including further rises in steel raw material prices, continuing sluggish growth in advanced economies and high oil prices.

He said “A promising growth outlook for steel in the coming months albeit uncertainty about raw material prices and other global risk factors”.

Although recovery has been uneven, the world steel industry is recovering at a faster pace than many expected at the onset of the financial and economic crisis in late 2008. After a strong rebound in 2010, the recovery in global steel demand will slow this year, in line with slower growth in the world economy.

Demand recovery in many advanced economies in particular remains lackluster. In contrast, demand in many emerging economies continues to increase steadily, supported by infrastructure investments, industrialization and further urbanization. This development is expected to continue with estimated demand increases of about 6% in both 2011 and 2012.

Governments and industry will have to explore policy means to ensure secure, predictable and accessible supply of steel raw materials for all steel producers. Other global risk factors include concerns regarding financial systems of many economies, remaining sovereign risks due to high levels of public debt, sluggish growth in advanced economies and high oil prices linked to geopolitical risks in the Middle East.

The Committee agreed to continue discussing developments in raw material markets with an aim to provide increased transparency and to explore and encourage policies that ensure secure, predictable and accessible supply of steel raw materials to all steel producers. Increasing resource efficiency and promoting recycling in order to facilitate the use of secondary raw materials are also of major importance in this context as are trade restrictions in steel raw materials. Global steelmaking capacity growing out of line with demand, causing supply-demand imbalances in some regions continues to be a reason for concern. The steel industry faces a formidable environmental challenge.

The steel trade policy environment has remained relatively supportive of an open steel market worldwide. Some trade and trade-related measures have nevertheless been applied to steel such as import taxes, import valuation procedures, differential VAT rebates, and import licensing systems, in addition to the use of trade remedies. While the use of trade remedies has not reached the levels seen in previous market downturns, there are still concerns about unfair trade. However, the product composition of trade appears to be changing, as steel makers in some economies move rapidly up the steel value chain, creating challenges for steel producers in other economies.”

Meanwhile, for the Malaysian steel sector the government’s decision to increase power tariffs is untimely for steel mills. Steel mills are currently suffering from a shrinking profit margin as a result of surging raw material costs. This cannot be fully passed on to their end users. Fuel price will continue to rise and that will be a major pain for Malaysia’s steel makers.

About 7 Malaysian companies have been shortlisted by Brazil’s Vale International SA, the world’s second largest mining company, to undertake the first phase of a US$2.5 billion (RM7.45 billion) infrastructure development project in Perak – a pelletising plant, which will be able to convert raw iron ore into pellets that are used in steel production. The first phase will involve a total capital expenditure of US$900 million (RM2.68 billion), which includes the US$98 million (RM292 million) the company had already spent in 2010. This project will anger very well for the local steel mills to produce quality steel industries.