After a difficult year, the outlook for the steel sector is still complicated

The steel sector is facing new challenges. Added to the already traditional challenges it has to face surrounding energy costs, commercial disputes between the United States and China, unethical commercial practices or the existing overcapacities in the world, are all the uncertainties brought about by the current pandemic.

Our lives, and subsequently our daily activity, have been turned upside down by the arrival of Covid-19. Not only has it restricted mobility, but it has also paralyzed a large part of activity, disrupting companies’ production, the deliveries of orders or our organizations’ investment plans.

Demand was affected in 2020. As a supplier industry, our main client sectors, such as construction, naval, industrial machinery or automotive, failed to perform as we expected. Especially the automotive sector, which accounts for 19% of steel consumption.

If we take a look at the figures for world liquid steel production in 2020, once again, it exceeded the threshold of 1,800 M. Ton., specifically 1,864 M. Ton. Despite having cast ?? 0.9% less than last year, China took the lead once again with 56% of world production.

The Asian giant has experienced exponential growth, going from 222 M. Ton. in 2003 to 804 M. Ton. in 2015 and to 1,053 M. Ton. in 2020. While increasing its production, it continues to attract higher volumes of steel imports from third countries to satisfy the national demand for steel.

China’s growth plans, specifically concerning the construction and industrial sectors to improve its economy, make it the world’s biggest buyer. This causes a global shortage and, therefore, according to the law of supply vs. demand, the prices of raw materials rise.

This material supply shortage makes China an increasingly important driving force in the price of raw materials. Added to this situation is the fact that the pandemic has limited demand in most markets due to lockdown measures, which has led to the highest price levels in recent years.

The cost of all raw materials, without exception, has increased in recent months. Iron ore has increased by almost 25%, ferrous scrap has reached the highest levels in recent times and the rest of the raw materials are behaving the same way.

This upward momentum, the largest in the last 10 years, will probably continue during the first half of 2021, affecting delivery times that are already extended into the third quarter.

Summary

China’s growth plans concerning the construction and industrial sectors to improve its economy make it the world’s biggest buyer

The cost of all raw materials, without exception, has increased in recent months