World crude steel output was calculated at 161 million tons, with a decrease of 5.8%. The steel industry is struggling with different prevailing types of issues in the market. Hiking in energy prices, production cuts, production costs are increasing while returns are decreasing, and a few trade activities indicate a recession in the steel industry. Low demand for steel scrap is causing to decline in steel scrap prices.
The oil and gas supply shortage has surged energy and transportation costs. Coal usage increased in Europe from 2.48 mnt in 2021 to 3.51 mnt by June 2022. Russia, a significant exporter, has stopped supplying to Europe. Miners of South Africa are reaping the benefits of higher prices in Europe. Natural gas and coal prices are three times higher in the 2nd quarter of 2022 compared to 2021. In Europe, many steel producers have halted their production activities. European non-ferrous metals association (Eurometaux) suggested that the EU should play a role in solving the matter and provide €50 million in support to the most affecting firms.
Energy inflation is causing a shutdown of many furnaces temporarily. The largest steel manufacturer in Europe, Arcelor Mittal, will have production cuts in different regions, i.e., Asturias in Spain, Steelworks in France, and Eisenhuttenstadt and Bremen in Germany. Nationalized Italian Steel at Taranto and Salzgitter, Germany’s second-largest steelmaker, has stopped production. It is expected that the inflation rate will be 8.1% in 2022.
Turkey, the leader of the steel scrap market suspended production due to higher cost of production, less demand, and declining rate of returns. Turkey has a significant fall of 6.9% in steel production and a 15.3% reduction in capacity utilization in the first seven months.
China’s productivity also declined due to rising inflation, the Covid lockdown, and low demand for Real estate. China’s cost of production is higher than the prices in international markets. Steel mills are not interested in exporting at lower prices.
The US’s Smederevo steel plant, US Steel’s Slovakian operation, and USS Kosice, operated by China Hesteel Group in Serbia, will halt production operations.
India has production cuts due to lower prices of steel products in the international market. An indirect effect of China’s lockdown through Vietnam’s decreasing demand forced India to reduce production.
With global inflation and low demand issues, Pakistan is facing a flood of misery. Many local mills have cut production due to low demand.
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