SteelMint Scrap Summit: Navigating new channels
Wang Mei of Shanghai-based Mysteel.

SteelMint Scrap Summit: Navigating new channels

Producers in steel exporting nations, including China and Russia, are entering the next decade with a more turbulent trade outlook.

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September 3, 2019

Finished steel, even more so than ferrous scrap, is traded across borders, but political decisions are increasingly making the practice costlier, according to presenters at the 4th Steel Scrap, Billet & DRI Trade Summit, hosted by SteelMint in Bangkok in late August.

In the global trade-intensive economy of the 21st century, steel producers in nations including Russia, Turkey and China have exported finished steel and semi-finished steel in considerable amounts to support manufacturers and construction projects around the world.

Not all of those importing nations are remaining welcoming however, with Artem Polischuk of Russia-based steel producer Magnitogorsk Iron & Steel Works (MMK) pointing to an “escalation of anti-dumping actions” from the United States, the European Union, India, Indonesia and several other Asian countries.

Although Polischuk says MMK is “used to exporting steel in such an environment,” he said that in late 2019, “Only Southeast Asia and Latin America look like a free market” for exporters.

Polischuk said that nonetheless, some 25 to 30 percent of finished and semi-finished steel is traded globally, and that low-cost producers such as MMK (which has mills in Russia and Turkey) can supply steel cost-effectively to willing buyers wherever they may be.

Turkish steel mills have been faced with domestic economic woes, including a depreciating currency, according to Ahmet Kunt of Turkish electric arc furnace (EAF) steelmaker Colakoglu Metalurji A.S. This has curtailed the amount of steel produced and consumed in Turkey, and also entailed the purchase of less imported ferrous scrap in 2019.

Turkish mills enjoyed a healthy export market in 2018, said Kunt, but 2019 has witnessed a severe decline in shipments to the United States, which had been one of the five major buyers in 2018. The better news for Turkish mills has involved increased finished and semi-finished purchases from Italy, Israel and several nations in the Middle East-North Africa (MENA) region.

Kunt said the 2019 shipment trends could be long-lasting, since the U.S. government has shown no signs of lowering its tariffs on Turkish steel, and in the meantime some “12 million new tons of EAF [steelmaking] capacity” has been announced in the U.S.

China is by far the world’s largest producer of steel, and while it consumes enormous amounts of its own product, it also exports a steady volume of finished steel and semi-finished steel billets, according to Wang Mei of Shanghai-based Mysteel. She said before 2015, such exports were “discouraged” by outbound tariffs, but those tariffs on steel have been reduced and now eliminated during the past five years.

The lifting of export fees does not mean China is necessarily poised to flood the global market with exported steel, said Wang. She said anti-pollution efforts have eliminated some 120 million tons per year of induction furnace steelmaking capacity in China during those same five years.

Nonetheless, China’s largely state-owned basic oxygen furnace (BOF) steelmakers continue to churn out billets, many of which make their way to the global market, and in particular to Southeast Asian countries that have “infrastructure and urban construction demand,” said Wang.

Wang added that additional rolling capacity to produce flat steel will likely keep many Chinese billets at home, but as in all things economic, market factors will play a role. She said when prices for billets within China drop, exports can become attractive, and there will likely be “a small amount of billet exports increasing when prices decrease” throughout the next decade.

The SteelMint 4th Steel Scrap, Billet & DRI Trade Summit was August 27-29, 2019, at the Hotel Avani Riverside in Bangkok.