Current Conditions for the Global Steel Industry

Market Dynamics

No Decision Yet on Suspension of Chinese Aluminum Import Duty: EU official

No final decision has been taken on whether the European Commission would suspend the imposition of definitive anti-dumping duties on imports into the EU of Chinese flat-rolled aluminum products, an EU official told S&P Global Platts Sept. 13.

"The anti-dumping investigation on imports of aluminum flat-rolled products originating in China initiated on Aug. 14, 2020 is still ongoing. Definitive measures, if any, must be imposed by Oct. 11," the official said in an emailed statement.

However, in the context of this investigation, "a request for the suspension of any measure, triggered by several stakeholders and based on substantiated information on the most recent market developments beyond the period covered by the anti-dumping investigation, is also under consideration and Member States are being consulted," the official added.

A fact finding exercise related to such a request was initiated in July, the official added.

EU producers' association European Aluminium issued a statement Sept. 10 saying that the European aluminum industry "is very determined to pursue all avenues to challenge the proposed suspension because it is fundamentally unwarranted and contradictory to the Commission's trade and climate ambitions."

China

China's Steel Output Cuts Continue to Gather Pace in September

China's steel output cuts have gathered pace in September and are expected to widen further in the coming weeks as the country looks to cap 2021 crude steel output and emphasizes on lowering energy usage, sources said.

A few mill sources expected China's steel output cuts to widen further in late-September or October, mainly as the overall cuts by mid-September have remained insufficient to keep the country's 2021 crude steel output within 2020 levels. During January-July, China's crude steel output was 8%, or 48 million mt, higher on the year.

More output cuts are expected to be seen in eastern and southern China in the coming weeks, also because Jiangsu, Zhejiang, Yunnan, Guangxi and Guangdong are still lagging behind their reduction targets of energy consumption.

In tandem with the accelerated steel output cuts, Chinese domestic hot rolled coil sales margins rose 41% to $165/mt on Sept. 13 from $117/mt on Sept. 1. The S&P Global Platts IODEX 62% Fe index dropped 15% to $123/mt over the same period from $144/mt.

Prices

Inflation-Stoking Commodity Prices May Weather China Demand Slowdown

The recent surge in commodity prices, which has fanned inflation in the U.S. and Europe, could be sustained by new demand from the Western world just as Chinese requirements start to wane.

Economic stimulus measures, including as much as $4.5 trillion of infrastructure and other spending in the U.S., may help industrial metals such as steel and copper maintain multi-year high prices following a China-fueled spike this year. Progress in COVID-19 vaccinations is also likely to support the global economy and commodities demand, offsetting a post-stimulus slowdown in China, the world's biggest user of raw materials.

U.S. spending "could go a long way to offsetting the weakening in China's demand," Bart Melek, head of commodity strategy at TD Securities, said in an interview. "This could be a pretty robust cycle."

The effects of rising commodity prices have rippled across the world. In the U.S., the consumer price index rose 5.4% year over year each month in June and July as the increase in energy prices and manufacturing costs fed through into U.S. inflation data. Prices rose 2.2% in the EU in July and 2.4% in the U.K. during June, driven by similar pressures.

"Commodities have filtered through directly to consumer prices but also indirectly in consumer goods, while the energy component has been an important factor in CPI," Gregory Daco, chief economist at consultancy Oxford Economics, said in an interview.

Commodity prices will likely only cool a little through year-end, according to an S&P Global Market Intelligence forecast, as infrastructure spending, supply constraints and the shift to renewable energy counter cooler Chinese demand. Global commodity prices are at the highest since late 2014, after surging 130% from a low in April 2020, based on the S&P GSCI index, which tracks a basket of 24 commodities.

Decarbonization

Sluggish Iron Ore Supply Response Could Hamper China's Decarbonization Drive

The S&P Global Platts IODEX 62% Fe index reached a record $233.10 per tonne May 12, driven by a resurgence in global demand, tightening supply and runaway steel prices. Although prices eased back in July, iron ore and steel will be key beneficiaries of the infrastructure investment drives in both China and the U.S. They will also benefit from the global renewable energy transition over the medium to long term through the rollout of new infrastructure for power generation, electric vehicle charging and high-speed electric rail networks. With a strong global steel production recovery underway, S&P Global Market Intelligence expects the iron ore seaborne trade deficit to deepen in 2021 and persist to 2025.

In this article, S&P Global Platts assesses the impact on the iron ore market of China's intensified decarbonization push and supply diversification, before shining light on the key projects expected to drive the seaborne iron ore supply response in the medium term.

The Chinese steel industry aims to reach peak carbon emissions by 2025 and to achieve a 30% reduction from the peak by 2030. These targets are set in accordance with the country's overall plan to see carbon emissions peak by 2030 and to achieve carbon neutrality by 2060.

The decarbonization push is expected to benefit the direct-feed iron ore products, pellet and lump. Unlike iron ore fines, which first need to be sintered with coke breeze and anthracite coal, direct-feed ores are directly charged to blast furnaces in a process that emits less pollution, including carbon.

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