In his presentation at the SteelOrbis Spring '10 Conference and 62nd IREPAS Meeting, Ruggero Alocci from Italian raw material and steel trading company Alocci Rappresentanze Industriali gave an overview of the situation in the post-crisis global economy, saying that the global recovery, following the deepest global downturn in recent history, is proceeding better than expected, and that the recovery is proceeding at different speeds in the various regions, led by emerging and developing economies, while many European and some CIS economies are lagging behind.
Noting that advanced economies are growing due to progressive restocking and are helped by support from their governments, while developing economies are growing due to strong infrastructure projects and urbanization investments, along with their export trade, Mr. Alocci underlined that the real concern will be how post-crisis macroeconomic policies deal with fiscal balancing and inflationary pressures.
In his presentation, Mr. Alocci showed that, between the years 2000 and 2010, global steel output rose from 850 million mt in 2000 to 1.22 billion mt in 2009, with the volume expected to reach 1.31 billion mt in 2010. However, advanced economies, including the US, the European Union and Japan, have witnessed decreases in their steel outputs, while developing countries, like India, Turkey, Middle Eastern and African countries, and most of all China, have steadily increased their steel outputs and capacities. The imbalance between advanced countries' steel production capacity and their decreasing output, along with developing countries' growing capacity and production, according to Mr. Alocci, will create an overcapacity problem in the near future, varying from 10 to 30 percent depending on the region, and this will have an adverse effect on the whole value chain, from scrap collection to steel distribution.
Regarding the new quarterly pricing system in the raw materials market, Mr. Alocci said that the new system will introduce volatility into the cost of steelmaking and that developing economies will suffer a smaller impact due to the new benchmark, as they already follow spot market prices, while advanced economies, where the benchmark was the basic contract, will suffer considerably due to the differences in price. Mr. Alocci also remarked on the strong and rapid price increases observed for scrap, DRI, HBI and pig iron and said that the boost in demand created by increased restocking activity cannot be sustained if real demand does not increase and, therefore, prices would fall once again but would not decline as low as January levels. Stating that scrap generation and collection would be lower in advanced economies in the future, Alocci said that current characteristics of the scrap trade will undergo change and that some scrap exporters like Russia, Ukraine and Poland will become importers, while others, basically the EU countries, will increase their scrap exports to Asia. A new flow of scrap exports is already observed from Italy to Turkey, he remarked.
Considering overcapacity risk, raw material cost pressure and environmental obligations for advanced economies, Mr. Alocci stated that China remains the player in the market which has the greatest advantages, provided it is successful in delivering stability and achieving sustainable growth.