High fever in the global steel market

06/05/2021
World steel prices continue to rise sharply, from Asia to North America, as iron ore prices are constantly breaking their own high records as investors and consumers bet the economy. Global recovery will continue to push steel prices up even more strongly.
The world outside of China is finally catching up with "Asia's Steel Giant" as the global rebound spurs a strong influx of buying across all markets, while output is difficult to catch up with.

In 2020, US stainless steel production has decreased by 17.3% from the previous year. Imports at the same time were also significantly lower. Distributors and service centres did not replenish during this time. As a result, as activity levels in the automotive and home appliances sectors increased, inventories of distributors across the United States quickly dried up, most notably rolled products. and plates. In fact, demand is expected to continue to recover in the second half of 2021 thanks to investment policies to improve infrastructure. This will put additional pressure on the country's already struggling supply chains.

Sectors such as manufacturing and construction are growing strongly as governments have committed to investing heavily in infrastructure in line with the roadmap to boost economic growth again after the Covid-19 pandemic.

Steel mill orders are full as buyers attempt to buy steel after a year of moderate production and vacant capacity. Meanwhile, the world's top iron ore mines have been affected by operational issues and have yet to fully recover from the supply shock two years ago.

The four details and charts below will show just how hot it was for the non-ferrous metal market.

Pricing role (of steel giants)


The price of hot-rolled coil (HRC), a reference product for the entire steel market, has tripled in the North American market compared to its low when the Covid-19 pandemic just happened (May 2020). ; Steel pipe prices used in construction also have a similar increase and are now 3 times higher than in August 2020. In Europe, prices also skyrocketed. In China, demand has increased dramatically during almost a year making steel the most expensive price since 2008.

The reference price of iron ore on the Dalian trading floor ended April 2021 at 1,158.5 CNY (equivalent to $ 178.64) / ton, bringing an increase from the beginning of the year to now reaching 33.5%.

Along with the trend of world prices, on the domestic market, the price of construction steel has now reached about 16.5 - 17 million VND / ton, about 40% higher than the same period last year. Not only that, although prices are already high, they are constantly changing.
 
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The steelmakers are the ones who suddenly benefit from this phenomenon, after a very difficult year earlier. Posco of Korea, one of the leading steel suppliers in the world outside of China, has just announced the highest 1/2021 profit since 2011 and expects the recovery trend of the steel industry to continue at 6 In the last month of this year, thanks to economic stimulus programs and the deployment of the Covid-19 vaccine around the world.

Demand for global recovery


Global steel demand is forecast to increase 5.8% this year and reach a higher level than before the Covid-19 pandemic, according to the World Steel Association (WSA). China's steel consumption, which accounts for about half of all global steel consumption, is expected to continue to rise after reaching its current high, while consumption in the rest of the world also recovers strongly.

 
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"The orders (that steelmakers receive) are really a very long time, some mills say they are selling forward contracts for the third quarter or even the fourth quarter of 2021", said analyst Tomas Gutierrez of research firm Kallanish Commodities. According to him: "The market is very optimistic about demand this year as there is a strong rebound after Covid-19 and many stimulus plans. Demand outside of China in April 2021 was already higher than that," he said. the same month of many years ago ".

On the Vietnamese market, construction steel production and sales in March 2021 also reached the highest level in the past 5 years over the same period. Accordingly, construction steel production in 3/2021 reached 1,056,710 tons, up 61% compared to February 2021 and 21% compared to the same period of 2020. Sales reached 1,247,582 tons, an increase of double compared with the previous month and increasing by 21.6% over the same period in 2020.

Raw material prices increased and scarcity


Iron ore prices are recovering strongly to near historic highs (historic record highs of 194 USD / ton) as Chinese steelmakers maintain steel production above 1 billion tons/year to meeting very high consumption demand due to economic recovery.

The price of steel materials imported to Vietnam also increased sharply. In March 2021, domestic scrap steel prices amounted to 8,850 - 9,100 VND / kg; scrap import price is 438 USD / ton; import billet prices also increased to 606-608 USD / ton.

From the beginning of the year to the middle of April 2021, the average import price of scrap steel increased strongly by 53% year-on-year to 403 USD / ton, according to the General Department of Customs. This led to an increase of only 5.6% of imports but an increase of 61% in turnover over the same period last year.
 
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Rising iron ore prices have helped boost the incomes of the world's top iron ore miners, even though they are still struggling to provide enough raw materials for the steel industry. Brazil's Vale SA in the first quarter of 2021 operated at a lower than expected capacity due to the distance from a mine excavator fire on a ship, slowing its recovery from the disaster. waste dams in 2019. BHP and Rio Tinto groups also reported a drop in exports in the past quarter due to bad weather in Australia.

Although Beijing aims to reduce steel production this year, it seems difficult to achieve given that consumption is so strong today.

Analysts at Australia & New Zealand Banking Group Ltd., including expert Daniel Hynes, wrote in a statement to customers: "It is very likely that Chinese steelmakers will follow the wave of The current uptrend, ie will accelerate production, at least this year ". The increasing wave of iron ore supply has been long-awaited by the steel industry, especially from the key supplier Brazil, but so far has not come true, so the iron ore supply is always in a scarce state.

The steel industry enlists profit


With steel prices constantly rising and China's efforts to reduce emissions to reduce environmental pollution by curbing steel production, steel mill profits have risen to their highest level in more than a decade. , according to calculations by Bloomberg Intelligence.

The Chinese steel industry's margins "continue to show that iron ore prices will remain at the current high", and that the price of this steel material needs to be reduced for steel prices to fall, "said home. Commonwealth Bank of Australia's Vivek Dhar analysis.
 
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