Globally low demand for steel products became a big challenge; mills have production cuts as a solution. It requires strategic planning. Steel mills intend to increase the prices, but buyers are unwilling to pay more with low demand. Export offers are lumbering. China’s HRC FOB offers have increased by 1.5% from $580 in September to $590 in October. Japan’s offers have declined by 4% from $565/T to $540/T. India’s offers have remained the same at $580/T in October.
Asia’s most exports were to Europe and USA. The declining demand forces them to rely on domestic demand. Covid lockdown and downfall in the real estate market as construction of new houses decreased by 45% in 2022 caused to fall in steel demand. China’s best strategy to export is hot rolled coil offers at lower prices, from $900/MT FOB in April to $630/MT CFR in October. Value-added tax in China is like export duty in India, making export expensive. An average Chinese mill’s production cost is about $580/MT, whereas depreciation of the Yuan may be increases exports.
Japan’s export offers have declined, but it is focused on exports. It has significant exports to the Middle East with declining offers at $595-$600/MT CFR. India has a higher offer for the same region at $620-$640/MT CFR. The depreciation of Japan’s yen (currency) and low domestic demand makes export more attractive. Less demand for automotive. Japan has diverted its focus on export from the EU to South Asia and South East Asia.
Indian mills are focusing not only on East Asia but also on Vietnam. Boron added an HRC offer to Europe at $670-$690/MT CFR. It is very challenging to have demand from Vietnam; on the safe side, it also relies on domestic demand.
European Union is facing an energy crisis which causes to raise the cost of production. One ton of HRC production requires 0.2 MWh for integrated and rolling mills, 0.5 MWh for EAF, and 0.4 MWh for BFs. High energy cost cause to increase in production costs and prices which ultimately increase the import cost.
Global trade remained at 416 million tons, with an increase of 11% in 2021 compared to 314 million tons in 2020. European Union had a significant import share than China and US. The share of flat steel products was 53% of total trade.
Low demand, high cost of production, supply cuts, and currency depreciation against the dollar will prevail in the market. Buyers are not interested in piling up the stocks due to market uncertainty. It requires correcting supply downward which may help to boost prices in Q1, 2023.
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