S TEEL S ECTOR O VERVIEW March 2019
S ECTOR | C ONTENTS O UTLINE ❑ Specific Terms & Products ❑ Raw Material Iron Ore | Price trend Steel scrap | Price trend ❑ Global | Steel Production | CY18 Top Producing Countries ❑ Global | Steel Consumption ❑ Pakistan Steel Industry Imported Quantity and Price Production and Import Mix Per Capita Consumption (Pakistan & Regional economies ) Duty Structure Industry Players
S TEEL | S PECIFIC T ERMS & P RODUCTS ▪ Crude Steel is steel in its first solid (or usable) form: ingots, semi-finished products – billets, blooms, slabs. Production refers to Crude steel. ▪ Consumption refers to Finished steel products – long (rebars) flat products (galvanized sheets) and tubes. Long Products Flat Products Tubes & Pipes Structural Re- Hot Cold Stainless Section Rolled inforcing Rolled Tubes Coil Bars Sheet Cold Tin Wire Merchant Rolled Welded Plate Rod Bars Coil Tubes Hot Dipped Coated Galvanised Sheet Engineer- T Iron Coil ing Steels Hot Coated Rolled Steel Plate Coil Tubes and pipes are Long Products are predominantly produced Flat Products are largely imported in produced locally and in Pakistan from imported raw material finished shape in Pakistan also imported in Pakistan and scrap
S TEEL S ECTOR | B IRD ’ S E YE V IEW ❑ Raw Material Iron Ore | Price trend Steel scrap | Price trend ❑ Global | Steel Production | CY18 Top Producing Countries ❑ Global | Steel Consumption
Iron Ore Price | Trend Analysis 180 160 140 CY17: $72 120 CY16: $58 CY18: $70 US$ / ton 100 Global Figures CY15: $55 80 CY13: $135 60 CY14: $97 40 20 Feb-19: $88 0 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 • Over the last few years, prices remained subdued. Increase in last two years was witnessed as Chinese ore production has been cut as the content is lower-grade and more costly than foreign supplies which made producers suffered amid a strict environmental clampdown • Hike in Jan- 19 is consequent to Vale’s dam disaster (Brazil). The global iron -ore market is in the grip of a supply shock after the deadly dam burst put as much as 70-million tons of annual supply at risk. • Prices are likely to increase in medium term on account of event at Vale’s site; evident from increase in price in Feb-19 Sources: https://www.indexmundi.com/commodities/?commodity=iron-ore https://www.hellenicshippingnews.com/china-wont-come-to-the-rescue-in-global-iron-ore-supply-crisis/ https://www.reuters.com/article/fortescue-results/update-3-australias-fortescue-beats-estimates-as-iron-ore-pricing-improves-idUSL3N20E5T3
Scrap Price | Trend Analysis 400 80% 60% 350 40% 300 US$ / ton 20% 250 0% 200 -20% Global Figures 150 -40% 100 -60% 50 -80% - -100% CY12 CY13 CY14 CY15 CY16 CY17 CY18 Iron Ore - US$/ton 129 135 97 55 58 72 70 Steel Scrap - US$/ton 367 346 352 212 192 266 345 Steel Scrap -%age change -11% -6% 2% -40% -9% 39% 30% Iron Ore -%age change -23% 5% -28% -43% 5% 24% -3% • Over last few years, price differential between steel scrap and iron ore had been fluctuating. Post Oct-17, price differential widened due to 1) mounting environmental pressures on sintering and blast furnaces have incentivized mills to use more scrap in basic oxygen furnace. 2) US government’s Section 232 probe into steel imports has boosted sentiment. If US mills lift their utilization rates, this will result in fewer scrap exports. Mills have therefore, frontloaded demand for scrap in anticipation of potential tightening of the market from 2QCY18 onwards. • Analysts are of the view that scrap value is currently over-valued and will be adjusted. With current scrap prices, iron-ore should theoretically be valued at around $106/ MT. With strong positive price co-relation of both, it is statistically probable to expect a convergence using linear regression. Sources: https://www.indexmundi.com/commodities/?commodity=iron-ore; https://blogs.platts.com/2018/03/08/iron-ore-steel-mills-price-diverges-scrap/
Steel Production | Trend Analysis | CY 18 2,000 35% 1,800 30% 1,600 25% 1,400 20% Global Figures mln tons 1,200 15% 1,000 10% 800 5% 600 0% 400 -5% 200 - -10% CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 Production - mln tons 1,433 1,537 1,559 1,649 1,665 1,621 1,627 1,690 1,790 Production - %age Change 16% 7% 1% 6% 1% -3% 0.4% 3.9% 5.9% • Global steel production stood at 1,790mln tons, up 5.9% YoY with largest contribution from Asia of 1,257mln tons • China and India contributed to Asia’s production of 928mln and 106mln tons respectively while Japan secured third place at 104mln tons Source: https://www.worldsteel.org/en/dam/jcr:2c14934a-092a-4013-a839- 85a2fe99f510/December%2520steel%2520production%25202018.pdf
Steel Production | Top Producing Countries | CY 18 • Top-10 represents 83% of the steel produced in the world Brazil , 2% • China secures highest place with 52% Iran, 2% Turkey, 2% share in world wide production Ukraine, 0% China • Iran recently joined league and Germany, 2% Japan replaced Ukraine (CY17: 21.3) Russia, 4% USA Top-10 steel producing countries India South Korea, 4% South Korea Rank Country CY18 CY17 Russia India, 6% 1 China 928.3 870.9 Germany China , 52% 2 India 106.5 101.5 Turkey USA, 5% Brazil 3 Japan 104.3 104.7 Ukraine 4 United States 86.7 81.6 Iran Japan, 6%, 5 South Korea 72.5 71.0 6 Russia 71.7 71.5 7 Germany 42.4 43.3 8 Turkey 37.3 37.5 9 Brazil 34.7 34.4 Source: https://www.worldsteel.org/en/dam/jcr:2c14934a-092a-4013- a839- 10 Iran 25.0 21.2 85a2fe99f510/December%2520steel%2520production%25202018.pdf
Steel Consumption | Top Consuming Countries | CY 17 Global Figures Mexico, 2% Iran, 1% Germany, 3% • Top-10 countries represents 76% of China Turkey, 2% USA the world’s steel consumption Russia, 3% India • China secures highest place at 46% South Korea, Japan 4% • Second and third place secured by South Korea Japan, 4% India, 5% Russia USA and India by contribution of China, 46% Germany 6% and 5% respectively USA, 6% Turkey Mexico Iran Source: Steel Statistical Yearbook 2018
S TEEL I NDUSTRY | P AKISTAN ❑ Pakistan Steel Industry Imported Quantity and Price Production and Import Mix Per Capita Consumption (Pakistan & Regional economies) Duty Structure Comparison sheets of Rated Steel Players
Scrap Iron & Steel | Imported Quantity & Price | Trend PKR 6.0 180,000 160,000 5.0 140,000 4.0 120,000 mln tons 100,000 3.0 Pakistan 80,000 2.0 60,000 40,000 1.0 20,000 - - FY12 FY13 FY14 FY15 FY16 FY17 FY18 7MFY19 Scrap - mln tons 1.6 1.8 2.0 2.8 4.2 4.2 5.2 2.9 Iron & Steel - mln tons 1.8 2.2 2.0 2.4 3.4 3.6 3.7 1.9 Iron & Steel - Price /ton 69,192 71,401 73,906 76,341 62,359 61,927 71,920 89,853 Scrap - Cost /ton 29,860 34,614 38,737 37,871 27,313 28,115 33,175 40,312 • Imported steel scrap witnessed uptick to 5.2mln tons in FY18 – up 26% YoY • Significant increase witnessed in prices on account of global increase in scrap prices and depreciation of Pak rupee against US dollar Source: Pakistan Bureau of Statistics
Steel Consumption | Production & Import Mix | CY 17 • Pakistan – net 9.0 75% importer of steel – 8.0 50% 7.0 imported 3.8mln MT 6.0 in CY17 mln tons 25% 5.0 • Production enhanced 4.0 0% to 4.7mln MT as 3.0 industry players have 2.0 -25% enhanced capacities 1.0 Pakistan amid infrastructure 0.0 -50% CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 demand in past Consumption 2.8 2.8 3.2 3.5 4.4 6.1 7.6 8.5 Consumption - %age Change 4% 1% 14% 9% 24% 39% 26% 11% 100% 9.0 90% 8.0 This consumption to 80% 57% 7.0 58% refers to long products, 56% 59% 57% 60% 47% 70% 52% 6.0 flat products and tubular 60% 5.0 products. 50% 4.0 40% 3.0 30% 43% 42% 2.0 43% 44% 40% 41% 53% 48% 20% 1.0 10% 0% 0.0 CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 Import - mln tons 1.6 1.5 1.9 2.0 2.5 3.4 4.3 3.8 Production - mln tons 1.2 1.4 1.3 1.5 1.9 2.7 3.3 4.7 Consumption 2.8 2.8 3.2 3.5 4.4 6.1 7.6 8.5 Source: Steel Statistical Yearbook 2018
Steel Product’s Production Data | Trend Analysis 500,000 450,000 400,000 350,000 Pakistan 300,000 250,000 200,000 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Billets/ Ingots H/ C. R. Sheets/Strips/ Coils/ plates • Pakistan’s production of billets and ingots (long products) has witnessed volatility in last few years as it takes into account the demand dynamics • Demand dynamics are fluctuated in scenarios of dumping of billets and rebars • Production of H/ C.R. Sheets (flat products) achieved level of 350,000 in Apr-17 and remained at sustained level; cyclical peaks witnessed period of July to August Source: Pakistan Bureau of Statistics
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