The Swirling Currents Of Global Steel Trade
Amid the shifting fortunes of the post-pandemic steel world, India´s growing status as a producer and consumer holds the most intrigue. Whilst still a long way behind China´s 2023 crude steel production level of 1,019 million metric tonnes, India´s 140.2 million metric tonnes was an 11.8% rise on its 2022 effort and kept it comfortably in second place above Japan. Concurrently, steel consumption in India jumped by almost 15% to a six-year high of 100 million metric tonnes in the period April to December last year. The surge was partly due to infrastructure spending in a pre-election year, much to the benefit of local providers. JSW Steel, India’s largest steelmaker by capacity, reported a nearly five-fold rise in third-quarter profit in 2023. Market observers believe India’s steel demand will stay strong as the country´s economic growth outpaces the global economy in the next fiscal year. In sharp contrast to India´s rising profile, the iconic Pittsburgh-based steelmaker, US Steel, recently reported a fourth-quarter 2023
net loss of $80 million. For the full year 2023, US Steel’s net earnings came in at just $895 million, down nearly 65% on its 2022 earnings of $2.524 billion. Last December, US Steel accepted an offer to be purchased by Japan´s Nippon Steel, though that acquisition may yet run into some political headwinds.
Meanwhile, China´s steel industry remains restrained by the country´s sluggish economy and a property sector in crisis. In January, a Hong Kong court ordered the debt-ridden property development giant, China Evergrande Group, to liquidate after it failed to reach a restructuring deal with creditors. Although the order is unlikely to have any near-term material effect on Evergrande, it will further dampen overall confidence in the sector. Property accounted for 30.8% of China’s steel consumption last year, down from 36.2% in 2020, according to S&P Global Commodity Insights. As a result of this subdued domestic steel demand, China increasingly turned its attention abroad last year, resulting in finished steel exports in 2023 reaching a seven-year high of 90.2 million metric tonnes, up 36.2% on the year. At the same time, imports fell to their lowest level since 1995 at 7.6 million metric tonnes, down 27.6% on the year, customs data showed. Analysts believe China´s steel exports will remain strong and imports low in 2024, amid high steel production, stagnant domestic demand and resilient steel consumption in emerging economies. Traditionally, rebar is a good indicator of the health of the construction steel sector, given that more than half of all rebar is consumed by property development. The Platts-assessed Chinese domestic rebar price per metric tonne of $549 in 2023 was down 11.2% on the average in 2022. Hot rolled coil is mainly consumed by manufacturers, but the property sector slowdown has weakened demand for engineering machinery, and was also crimped China’s overall consumer spending. Thus, the average domestic HRC price in 2023 fell 9.4% on the year.
Finally, as 2024 unfolds steel prices are likely to be impacted by the danger of passing through the Red Sea. In normal times, 15% of global shipping traffic travels that route. However, increasingly, shipping companies are choosing to add the 12,000 nautical mile extra distance and increased journey time of rounding South Africa’s Cape of Good Hope on their way to Europe. Drewry’s World Container Index indicated in mid-January that transport costs had risen to US $3,777 per 40-foot container, an 82% jump on the same month in 2023. Platts reports that some Asian steelmakers have withdrawn from the European market altogether following the rise in shipping costs. Others have shifted to FOB offers, leaving steel buyers to make their own transport arrangements.