In December 2021, Leeco Trading’s Commercial Director, Antonio Rosset, gave a presentation on global steel market trends at MMSteelClub’s 2021 Dubai Steel and Raw Materials Hybrid Conference. You can read more about Leeco Trading’s presence at the conference here.
This article highlights the topics covered by Antonio, including global steel production trends, steel exporting trends and global shipping trends.
You may also download Antonio’s full presentation.
GROWING SUPPLY AMID STALLING DEMAND
Since the modern steel industry’s inception in the late 1850s, steel production has grown exponentially, especially as more steel-producing countries have entered the market. There have also been significant changes in who the global leader of steel production is over time. While the U.S. dominated steel production for most of the 20th century, China emerged as the top steel producer in the mid-1990s and remains the top producer by a wide margin today.
Image Courtesy of World Steel Association
China’s relatively rapid and substantial investment in steel production completely altered the global steel landscape. According to China’s National Bureau of Statistics, China produced 1.03 billion tons of crude steel in 2021. Additionally, China, along with Russia and Japan, accounted for over a third of all steel exports in 2020.
Image Courtesy of World Steel Association
Because China produces and exports a significant amount of steel, the country has a major influence on global steel supply and – therefore – pricing.
For example, if China produces and exports a high amount of steel during a time when global demand is slowing, available supply will be greater than demand, which would push prices downwards.
Additionally, China’s production and exporting patterns can also impact demand in importing countries. If Chinese steel products are cheaper than steel products made domestically, buyers in that country may opt to import materials to reduce production costs.
STEEL MARKET FORECASTS & OUTLOOKS
According to World Steel Association’s April 2022 Short Range Outlook report, we can expect global steel demand to grow 0.4% year-over-year in 2022, reaching 1,840.2 Mt. World Steel Association also forecasts that steel demand will grow 2.2% year-over-year in 2023 to reach 1,881.4 Mt.
Image Courtesy of World Steel Association
In terms of steel usage, China – who is currently the world’s largest user of steel products – is expected to see no year-over-year growth in 2022 and little year-over-year growth in 2023. Other parts of the world, however, are seeing strong growth trends. Leeco Trading serves many customers in Brazil, which expects usage to fall year-over-year in 2022 but grow in 2023.
Image Courtesy of World Steel Association
We are closely watching steel production trends in China, as the country drives global steel prices, especially as privately-owned Chinese mills merge with state-owned companies. As a result, the Chinese government will further control China’s steel supply.
These newly-merged state-owned companies focus on producing steel that meets local demand rather than global demand, and this shift could change China’s production and export levels.
SHIPPING REMAINS A GLOBAL CHALLENGE
Since the start of the COVID pandemic, we have experienced many global shipping challenges, including port congestion and a shipping container shortage. These factors, in turn, caused ocean freight costs to skyrocket and created significant supply chain delays globally.
Image Courtesy of Freightos
For a more extensive look at global shipping trends, read our article on ocean freight disruptions and how they impact global trading.
CARBON EMISSIONS IMPACTING THE FUTURE OF STEEL
As global carbon emissions continue to rise, we have seen countries strive to make manufacturing process – including steel production – carbon neutral.
According to a report by the U.S. Energy Information Administration (EIA), steelmaking is one of the most energy-intensive industries, accounting for about 7% of global carbon emissions in 2020. While the report found that Europe would cut carbon intensity in steelmaking by 31% by 2050, Europe represents less than one-tenth of the world’s steelmaking.
The world’s largest steelmaker – China – is expected to reduce the carbon intensity of its steel production by 14% by 2050. China is also the world’s largest producer of carbon emissions. The country has a long-term plan in place to reach zero emissions and is projected to meet its 2030 target after pandemic-related shutdowns caused emissions to drop.
Image Courtesy of BBC News
Electric arc furnaces (EAFs), which use scrap metals in steel production, are less energy-intensive than blast furnaces, which use raw materials to produce steel. However, about two-thirds of the world’s steel is produced with blast furnaces.
China primarily uses blast furnaces to produce steel and faces some challenges when it comes to adopting EAFs. The lack of scrap and high cost of gas and electricity in China make it expensive to produce steel via EAFs. Most blast furnaces in China were also built within the past two decades and will likely be in service for several more years.
Making steel production carbon neutral will require balance. Green policies that are too aggressive could deter new investment in “old” energy and reduce available supply. Green policies that are too passive will do too little to curb rising, climate change-causing greenhouse gas emissions. Failure to address these trends quickly will lead to further environmental destruction and social and economic chaos.
“Green steel” is one trend that we expect to continue over the next few years, and we will continue to monitor how environmental policies impact global steel production and consumption.
CONCLUSION
Navigating the global steel market and staying up-to-date with the many emerging and ever-changing trends can be challenging. Partnering with a trusted trading company, however, can make it simple to source the materials you need. Experienced international trading companies – like Leeco Trading – are knowledgeable about the forces impacting the market landscape and can help you strategically import steel and metals.
Contact our team today to learn more about our services or request a quote.
