A Review of developments in The Global & Indian Steel Industry Monthly edition Issue No. 46 JANAURY 2020 (Covering December 2019) Compiled on behalf of Indian Steel Association, By Mr. Anup Kashyap, Deputy Manager-Technical Strictly for Internal circulation About the Report ❑ The Indian Steel Association introduced a monthly report titled ‘A REVIEW OF DEVELOPMENTS IN GLOBAL & INDIAN STEEL INDUSTRY’, from August 2016. ❑ The report provides general background information reviewing the status of the developments in the global and Indian steel industry, pertaining to raw material, production & consumption, trade, shipping, pricing & forecasts, country reportage, policy developments, economic parameters etc. ❑ The consistent format of the report provides an insight into the relevant aspects of steel scenario globally and domestically . ❑ The information has been sourced from independent third party databases, knowledge sources and news reports, and the authenticity of the same has not been independently verified by ISA. ❑ The report is issued in the last week of each month to the members of Indian Steel Association , various ministries / departments / institutions. Contents of the Report SI. Title Page No Number 1. Global Economic Development 4-6 2. Global Steel Development 7-14 3. Domestic Steel Development 15-19 4. Indian Economic Development 20-23 5. About ISA 24-30 GLOBAL ECONOMIC DEVELOPMENTS 4 Country-wise Growth Forecasts 2019 - 2024 In % 2020 2021 2022 2023 2024 Real GDP Growth 6.1 6.2 6.5 6.4 6.3 India Inflation 4.2 4.4 4.4 4.3 4.2 Real GDP Growth 5.9 5.7 5.5 5.0 4.7 China Inflation 4.9 4.2 3.1 2.9 2.7 Real GDP Growth 1.7 1.8 2.0 1.8 2.2 U.S.A Inflation 1.7 1.9 2.1 1.8 1.8 Real GDP Growth 0.4 0.9 1.1 0.9 1.0 Japan Inflation 0.7 0.9 0.8 1.1 1.2 Real GDP Growth 1.4 1.7 1.8 1.7 1.7 EU 28 Inflation 1.5 1.7 1.9 1.9 1.9 As of 20th January 2020 The assumptions for forecasts are available on the website of the Economist Intelligence Unit Source: Global Forecasting Service, The Economic Intelligence Unit 5 Global Economic Scenario ▪ In 2020-21 global growth forecasts have long reflected our expectations that US-Iran tensions would remain high but remain short of a full-blown war. As such, we maintain our view that the global economy will grow by 2.4% in 2020 (up from an estimated 2.3% in 2019). ▪ Downside risks to this forecast remain high, however, especially if a flare-up in tensions leads to the closure of the Strait of Hormuz, through which about 20% of global oil supplies transit. ▪ Oil markets have so far reflected these fears; on January 6th crude oil prices briefly rose to US$70/barrel, but since then they have eased back to about US$68/b (the level that they were at before General Suleimani's assassination). ▪ We expect oil prices to remain elevated in the first quarter of 2020, at an average of US$68/b (up from US$65/b previously). However, coupled with record US oil production, an expected slowdown in the Chinese and US economies will keep a lid on oil prices in the coming months. ▪ Should US-Iran tensions flare up, however, oil prices could rise to as much as US$90/b, fuelling a rise in inflation and dampening sentiment. This represents one of the main risks to the global economy in 2020-21. Source: Global Economic Scenario, The economist 6 GLOBAL STEEL DEVELOPMENTS 7 Global Steel Output ➢ Global crude steel production reached 1,869.9 million tonnes (Mt) for the year 2019, up by 3.4% compared to 2018. Crude steel production contracted in all regions in 2019 except in Asia and the Middle East. ➢ Asia produced 1,341.6 Mt of crude steel in 2019, an increase of 5.7% compared to 2018. China’s crude steel production in 2019 reached 996.3 Mt, up by 8.3% on 2018. India’s crude steel production for 2019 was 111.2 Mt, up by 1.8% on 2018. Japan produced 99.3 Mt in 2019, down 4.8% compared to 2018. South Korea produced 71.4 Mt of crude steel in 2019, a decrease of 1.4% compared to 2018. ➢ The EU produced 159.4 Mt of crude steel in 2019, a decrease of 4.9% compared to 2018. Germany produced 39.7 Mt of crude steel in 2019, a decrease of 6.5% on 2018. Italy produced 23.2 Mt in 2019, down by 5.2% on 2018. France produced 14.5 Mt of crude steel, a decrease of 6.1% on 2018. Spain produced 13.6 Mt of crude steel in 2019, a decrease of 5.2% on 2018. ➢ Crude steel production in North America was 120.0 Mt in 2019, 0.8% lower than in 2018. The US produced 87.9 Mt of crude steel, up by 1.5% on 2018. ➢ The CIS produced 100.4 Mt, a decrease of 0.5%. Russia produced 71.6 Mt of crude steel in 2019, down by 0.7% on 2018. Ukraine produced 20.8 Mt of crude steel in 2019, a decrease of 1.2% compared to 2018. ➢ Annual crude steel production for South America was 41.2 Mt in 2019, a decrease of 8.4% on 2018. Brazil produced 32.2 Mt in 2019, down by 9.0% compared to 2018. Source: World Steel Association 8 TOP 10 STEEL PRODUCING IN THE WORLD 2019 Rank Country 2019 (MT) 2018 (MT) % 2019/2018 1. CHINA 996.3 920.0 8.3 2. INDIA 111.2 109.3 1.8 3. JAPAN 99.3 104.3 -4.8 4. UNITED STATES 87.9 86.6 1.5 5. RUSSIA 71.6 72.0 -0.7 6. SOUTH KOREA 71.4 72.5 -1.4 7. GERMANY 39.7 42.4 -6.5 8. TURKEY 33.7 37.3 -9.6 9. BRAZIL 32.2 35.4 -9.0 10. IRAN 31.9 24.5 30.1 Source: WORLD STEEL ASSOCIATION,MT-Million tons 9 Country wise Crude Steel % Share 2018 vs 2019 2018 2019 Source: World Steel Association 10 CHINA STEEL DEMAND IN 2020 ➢ China’s finished steel consumption will increase 2% on the year to 889.8 million mt in 2020, driven by demand from construction sector, according to China Iron & Steel Association (CISA). ➢ The total steel consumption rose by 6% on the year in 2019 to 875.3 million mt. ➢ Steel market sources considered a further 2% rise in steel demand in 2020 as decent growth, considering domestic steel demand in 2019 had been strong enough to absorb most of China’s incremental steel production. ➢ The construction sector — property and infrastructure combined — will remain the biggest steel demand driver in 2020, consuming 498 million mt of finished steel, up 2% on year, according to CISA. The construction sector’s steel consumption increased 8% on the year in 2019 to 486 million mt. ➢ Growth in property new starts will slow in 2020, but infrastructure construction will accelerate and offset the downward pressure on steel demand from weaker property construction. ➢ CISA expects healthy steel demand growth rate in the machinery sector, due to steady demand growth from the petrochemical and construction industry. Source: CHINA IRON AND STEEL ASSOCIATION (CISA) 11 USA STEEL INDUSTRY CAPACITY UTILIZATION 2019 ▪ The U.S. steel sector reached a capacity utilization rate of 82.3% for the year through Jan. 18, according to the American Iron and Steel Institute (AISI). ▪ Production for the year to date reached 4.94 million tons, up 2.6% from production during the same period last year (when capacity utilization rate reached 80.4%). ▪ By region, production for the week ending Jan. 18, 2020 broke down as such: • Northeast: 216,000 net tons • Great Lakes: 686,000 net tons • Midwest: 208,000 net tons • Southern: 730,000 net tons • Western: 88,000 net tons ▪ From the price side, U.S. steel prices have continued to trend upward after seemingly hitting a bottom from mid-October to mid-November 2019. ▪ The U.S. CRC price is up 2.39% over the past 30 days, reaching $772/st as of Jan 20. ▪ The U.S. HRC is up 3.21% to $578/st. Source: American Iron and Steel Institute (AISI) 12 Trend in USA Steel Imports 2019 ➢ United States finished flat steel imports fell by 7.1 % M-o-M in Nov ‘19 against Oct’19 registered an Import volume 915476 metric ton. HRC /Plates fell by 15% M-o-M. ➢ Finish long imports volumes also fell to 189893 metric tons down 17.4 % M-o-M in Nov’19. ➢ On the Other hand ,Country’s semi finished steel imports volumes has observed a rise by 7.8 % M-o-M. ➢ Imports of ferrous scrap by US moved down by 12.9 % M-o-M in Nov’19 to 0.23 Million tons. ➢ Iron ore imports volumes have sharply fell to 212401 Metric tons in Nov’19 against ‘19 by 52.3 5 M-o-M. Source: Steel Mint 13 AUSTRALIAN COKING COAL PRICE CHART Source: Coal Mint 14 DOMESTIC STEEL DEVELOPMENTS 15 Indian Steel Industry - CY 19 Vs CY 18 Commodities Year Production in MT Export in MT Import in MT 2019 228.51 19.1 2.2 Iron Ore 2018 204 10.6 15.6 2019 67 13 0.1 Pellet 2018 63.6 8.2 0.7 2019 NA NA 55 Coking Coal 2018 NA NA 53 2019 111 NA NA Crude Steel 2018 106 NA NA 2019 45.31 5.45 2.37 HRC/Plates 2018 45.44 2.99 2.41 2019 15.71 0.62 0.5 CRC 2018 13.86 0.71 0.48 2019 40.43 0.51 0.28 Rebars/Rod 2018 38.11 0.42 0.22 Source: Steel Mint Research 16 Export Rise of Steel in India ▪ India’s Steel Export saw an increase of 23% in CY 19 compared to the figure in 2018.