During his presentation at the SteelOrbis 2020 Fall Conference & 83rd IREPAS Meeting held virtually on September 21 with approximately 450 actual participants, Alexander Gordienko, international sales manager of Spain’s CELSA Group, stated that the global GDP growth projections for this year have been revised twice due to the uncertainty in the global economy and currently they point to a decline of 4.9 percent. Meanwhile, the worst hit are advanced economies with an expected decline of eight percent, while emerging markets are expected to see a GDP reduction of only three percent. According to Mr. Gordienko, initially the coronavirus pandemic was expected to impact the Asian region the most; however as these countries handled the disease better, European countries have been the ones with the sharpest reduction in GDP.
As for the European construction sector, while construction output in Europe is expected to decline by 11.5 percent this year, the HS2 train project will help UK construction in the second half of the year, the CELSA official stated.
According to Gordienko, in 2020 global steel demand is expected to decrease by 6.4 percent to 1.65 billion metric tons, which means a drop of 113 million metric tons compared to 2019. For 2021, the projection for global steel demand is 1.72 billion metric tons, up 3.8 percent year on year. He also underlined the decline in China’s steel exports, which is due to the rise in domestic steel demand in the country. “As we all know, what happens in China is affecting all of us. In 2020, the Chinese government announced its biggest infrastructure investment plan of all time”, he said.
According to the CELSA official, global long steel consumption declined by 8.5 percent in the first half of this year, with a 3.6 percent decline in the second half. As for rebar, demand declined by 1.8 percent in the first half of the year, while in China alone it increased by 4.7 percent year on year.
Commenting on the spread between rebar, wire rod and billet prices on FOB basis, Mr. Gordienko said, “It is very clear that the price trend is up, with wire rod prices showing the best performance. In the past, rebar and wire rod prices were almost the same. Now, with the changes in wire rod production capacities and China not exporting anymore and importing instead, the spread increased.” He also said that the reason for wire rod being stronger among other products is because of the combination of low stocks, some increased demand from the automotive sector, and some idled capacities, especially in Europe, during the first half of 2020. According to Gordienko, since the idled capacities are blast furnaces, they are not easily put back into production and, as a result, the wire rod market is fueling the rebar market. “Up to the end of the year, we will see more price increases for finished products,” he said.
Answering a question about the recovery of the steel industry from shutdowns, Mr. Gordienko stated, “Demand has reversed, but it is very different depending on regions. Some European countries have started new lockdowns, like the British government thinking about a second lockdown that’s going to affect our industry. The overall outlook is still very positive for the second half of the year as the market is recovering very quickly. But you have to look at the country specifics one by one. We obviously have issues in some parts of the world.”
In reply to another question about the construction sector, Gordienko said that the need for infrastructure investment in the US may be an opportunity for the steel industry. “We are entering a great unknown. People got used to working from their homes; will we be building new offices? We got used to buying online; will we build shopping centers? I do not know. The average infrastructure in New York is 90 years old. The latest fires in California were due to the collapse of electric lines which had a 100-year-old iron hook. The US will have to invest in infrastructure and we will hopefully enjoy being part of it,” said the CELSA official.
Answering a question on why rebar prices did not plunge during the pandemic like prices of other products, he said, “Rebar mills are EAFs and so they operate on a very tight margin, depending on scrap prices. However, the pandemic has created a scrap shortage. Because of lockdowns, there was no door-to-door collection and that put pressure on scrap prices. The second factor was probably China, which imported huge quantities of semi-finished steel and that put a bottom to the market. These are two main factors causing rebar prices to remain stable.”