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These two fundamental steel raw material inputs were analysed by the Kallanish editorial team on Wednesday the 13th January 2021.
Don't miss another webinar, seeing them live is a great experience and the best way to ask your questions directly to the speakers.
You can download the webinar presentation from the Scrap and Iron Ore webinar - January edition by clicking here.
Watch the recording below on our youtube channel.
These are the questions which were asked during the live showing of the Scrap and Iron Ore Markets Webinar 2021. Some of these questions were answered live, but we didn't have time to answer them all. Please see the Kallanish editorial team's answers below.
Q: We hear that supply is tight, in raw materials but also in HRC. How can you explain the latter when we know that mills are far from running at 100% utilization rate?
A: Dan (North America): The supply tightness in the US is due to several mills that have yet to ramp back up from Covid - namely mills without a lot of traditional contract tonnage to keep them afloat. They’re loath to restart in full with a reliance on purely the spot market.
A: Tomas (Asia): Unlike other regions, in China mills have been producing at high levels for most of 2020. With high HRC production margins, production has also tilted towards flats production and away from longs. Nevertheless, high production has not brought flat product prices lower. End user demand is high in China as the country has been very successful getting the production side of the economy operating at high levels through stimulus. Now CHina is further supporting consumption, which should again favour flat products. Notably, there are new purchasing and recycling incentives in the pipeline for automotive and white goods consumers which could sustain manufacturing activity
A: Emanuele (Europe): A very good question. Mills continue to be below their 100% capacity, but they are now running at good levels in Europe. Nevertheless it takes time to fully recover production lost during the peak of the pandemics. The tightness in the coil market should continue in Q1 and could be solved going forward, but it is also accentuated by the lack of import options.
Q: I heard that Vale gave a warning to its customers that it will be able to deliver only 50% of the contracted in Q1 2021. is that true? Would it make a difference to prices?
A: Todor (South America): Vale's iron ore shipments are likely to increase in the coming quarters with the global industry post-coronavirus open-up and the supply shortness progressively eases. The miner's recent announcement of the restart of Samarco's production and exports together with the planned expansion of the S11D unit and resumption of the halted capacity at some of its sites following the Brumadinho accident convinces me that Vale could increase its shipments in 2021.
A: Tomas (Asia): Overall however, iron ore supply and demand should both be more robust in 2021. As prices have already spiked, it will be difficult for prices to increase further. Once iron ore demand slows when mills have restocked for pek production in Q2, prices should tail off.
Q: Demand increased drastically in flat products starting in November. Afterwards, prices increased over 50% in last 2 months due to low stocks. How do you see stock levels in industries? Have end users purchased their requirements and prices will loose? Or are stock levels still not sufficient and price increases continue in short term?
A: Dan (North America): Stocks are extremely low throughout the US flat-rolled supply chain - available limited supply is being eaten up almost instantaneously by heavy draw from auto, which is struggling to recoup ground lost during the Covid pandemic. In addition, a global semiconductor shortage means that auto catch-up won’t wrap up anytime soon - sources are already predicting that most Big Three factories will work through the Fourth of July, a traditional holiday period.
A: Tomas (Asia): In China, inventory levels had been stubbornly high for much of 2020 despite strong demand. November and December however saw significant inventory drawdown. No, in a seasonal quiet patch for end user demand, market inventories are increasing but from a fairly low level. That means that if demand after the Chinese New Year is as strong as expected, there could be further support for prices.
A: Emanuele (Europe): In the sort term in Europe the market remains tight for coils. Buyers have not overstocked during the last two months and we believe there is enough demand at the moment to support the sentiment at least into Q2.
Q: There has been around 30 million tons capacity cut in EU due to pandemic. What is your expectation on timeline of re-opening of such mills to ease increased demand? Alternatively, should producers not open such capacities for prices to continue strong trend?
A: Emanuele (Europe): Most capacities idled during the peak of the pandemics were restarted by September 2020. The next capacity to be restarted is the Ghent BF by ArcelorMittal, which was temporarily idled due to relining and should restart by mid-February. Producers have gone back to “normal” output levels and WorldSteel already noted that in November crude steel production in the EU was up %5.5 y-o-y.
Tomas is the Managing Editor Asia for Kallanish and produces editorial content on the region, with a focus on China, as well as overseeing Kallanish's operations in East Asia. He is based in Shanghai, where he has lived and worked for the last six years. Tomas speaks Mandarin as well as English and Spanish. He has also spent three years in Beijing studying and working. Previously, Tomas worked at Steel Business Briefing, where he joined shortly after graduating with a masters degree in Asian politics from SOAS in London.
Burcak brings 15 years experience in covering global long products and scrap pricing. She is responsible for the Kallanish daily scrap assessment in Turkey, as well as European shredded and US domestic and export pricing . She is based in Istanbul, prior to joining Kallanish she worked in SteelOrbis as director of Research.
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