Second Day at Bangkok Conference: Future of Steel Market and GE Industry Insight
Mining News Pro - China to dominate future steel and scrap dynamics
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According to Mining News Pro - Day 2 of SteelMint Events’ 4th Steel Scrap, Billet & DRI Trade Summit – Emerging Markets and the 2nd Global Graphite Electrode Conference was packed with back-to-back insightful sessions on scrap and graphite electrodes. Smaller plants seem to be in vogue with smaller capex and opex and the share of recycled steel is seen rising in China to 30% from the present 20% by 2025. Steel cycles are getting shorter which means companies have to manage the environment better. In India, EAFs are likely to see a new dawn and along with that the graphite electrodes industry, whose fate is linked to the former, is likely to see a better future too.
Davinder Chugh, Senior Partner, Synergy Capital, UK, the keynote speaker, set the tone for the rest of the morning session. Chugh, who has worked with Arcelor Mittal for over 20 years at the group management board level, said, future steel and scrap dynamics are to be dominated by China, which had so far placed its faith in iron ore and coal, resultantly being a heavy oxygen route user in steel-making. But environmental concerns and scrap availability triggered a shift in production. Consequently, it prioritized EAF expansion as part of its 12th Five-Year Plan in 2010.  The share of EAF steel-making is up 45% from 1950 to 2018 against the world’s 29% and ex-China world’s 13%. And the equation is changing fast today with BOF steel mills increasing their scrap input to meet higher pollutant emissions standards. In terms of scrap input usage, it is at 20%. Consumption is driven by higher EAF capacity. And China is getting ready for a dominant role in global steel industry with a huge scrap pipeline. Its scrap availability is expected to rise from 300 million tonnes (MnT) in 2030 to 400 MnT by 2050 against the expected global scrap availability of 1 billion tonne (BT) in 2030 and 1.3 BT by 2050.  But who will be leading this growth? According to Paul Bodkin, Commercial Manager, Ferrous Sales, EMR, “Developing countries, and particularly China, are expected to show the strongest growth in their scrap availability, reflecting the astonishing increase seen in their steel use in the 1990’s and 2000’s.” He added that, currently, China has a relatively low share of EAFs and uses relatively less scrap than developed regions, both in EAF and BOF steelmaking but this could change with the increasing availability of scrap… In other developing regions, such as India and the ASEAN, continued strong growth in steel production and use will also contribute to the growth in scrap availability with such growth expected to see their scrap
availability doubling in the next 15 years.
Steel scrap prices are a topic that the audience avidly waited to hear about and almost all speakers touched upon the same. As per Chugh, regional demand-supply imbalances have always created price gaps. Nishtha Mukerjee, Head of Research, SteelMint India, said Turkey’s imported scrap prices are at two-year lows while Japanese scrap prices are struggling amid trade tensions with South Korea. South Asian imported scrap prices are at 2-year lows while Chinese domestic scrap prices fell after hitting their 2019 high.

Turkey
Ahmet Işık Kunt, Purchasing Manager, Raw Materials, Colakoglu Metalurji, made a presentation on Turkey, which is the largest importer of steel scrap. He said if a y-o-y comparison is made of the first 5 months of 2018 versus 2019; apart from the 21.1% finished steel production decrease, consumption decreased even more by 34.9% and that net steel exports were the main industry driver of Turkey in 2018. Steel exports from Turkey increased by 21% in H1 of 2019 compared to H1 of 2018.

Factors that affect Turkey’s production growth included violent devaluation of the Turkish Lira, graphite electrode price increase, industrial electricity prices were up 82% since the beginning of 2018, decrease in domestic demand for steel products, and global protectionism in the form of US Section 232 and EU safeguard quotas.

Graphite Electrodes
The global graphite electrodes utilization rate is estimated to drop from 77% in 2018 to 39% by 2023.

The narrowed difference between rebar and scrap prices at the end of 2018 in China squeezed the profits of rebars into negative territory, which in turn lowered the operating margins of the EAFs. Consequently, GE demanded was reduced while the continued expansion had built up inventories. The GE market had slightly picked up in April following EAF resumption but inventory pressure loomed large still. UHP610 prices fell from USD 15,256 on December 3, 2018 to USD 7,322 on August 2, 2019, down 52%.

China’s increased exports posed a threat to GE producers in other countries.
Amid pressure of a price downturn, some small and medium scale GE producers stopped production in May, which was recorded at 34,800 tonnes, but other capacity later overrode this and sent the growth up again in June and July, 2019 to 39,200 tonnes.

A very upbeat Dr Mark Shujun Ma, Chairman & CEO, CIMM Group, China, said, with the increasing of EAF steelmaking, the demand for GE will increase on a large scale. “At present, the world`s total output of crude steel is 1.69 billion tonnes and as per predictions, it will grow to 2.8 billion tonnes by 2050 with the share of EAF steel reaching 70%. In that case, there will be about 2 billion tonnes of EAF steel production and the demand for graphite electrode will reach about 6 million tonnes,” he added.
The day ended with active participation from the audiences in the form of question-answer sessions that were highly informative.


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