Speaking today, April 11, at the SteelOrbis 2016 Spring Conference & 74th IREPAS Meeting being held in Lisbon, Eric Louvert, senior advisor in metals and mining at BNP Paribas, stated that, while prices of iron ore and coking coal declined, scrap prices failed to decline to the same extent. As regards scrap, Mr. Louvert said that the problem here is that scrap collection in relatively rich countries where salaries are high creates a kind of floor for scrap prices. He added that, as scrap has become expensive compared to iron ore and coking coal, some electric arc furnace-based producers prefer to buy semi-finished steel products instead.
According to Mr. Louvert, one of the consequences of EAF-based producers losing competitiveness is the increased flow of billet exports from China to Turkey, since flexible companies such as Turkish mills choose semi-finished products instead of scrap. Apart from EAF-based producers, DRI-based producers are also losing their competitiveness. The BNP Paribas official pointed out that blast furnaces use coking coal, while DRI-based producers use natural gas and gas prices are not declining in DRI-producing countries but instead have a tendency to increase.
Mr. Louvert stated that steel prices rebounded sharply in March this year, following the announcement by the Chinese government of a capacity cut of 100-150 million mt. He went to say that in 2015 Chinese producers lost massive amounts of money. There was a need to restore margins in China and this is one of the main reasons why prices had to rebound.
Regarding the demand outlook, Louvert said that demand in Europe has more room to recover from the pre-crisis levels than demand in the US, while demand in commodity exporting countries like Russia, Brazil and the GCC will be sluggish. On the other hand, Southeast Asia could be the most dynamic region in the short term.