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Kallanish Kallanish

Knowledge matters Knowledge matters

July, 10th 2020

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Kallanish Steel Weekly: Steel market regionalisation continues to be major issue for sector (Nov. 5, 2019)

Regionalisation in the global steel market is continuing to accelerate, creating many problems for participants and for the wider industry. This is according to a number of speakers at last week’s World Steel Dynamics conference in Milan.

Michel Van Hoey from McKinsey & Company calculates that in 2018 only 22% of the global steel demand was supplied by traded steel products. This share was almost half of the 40% calculated in 2000. The fall in this share has accelerated during recent years and has been fuelled mainly by a reduction in net exports from China.

“It seems like we have gone back to the old days of regional steel markets. The problem is the old days were not good days,” Ugur Dalbeler, ceo of Turkish Colakoglu says with regard to the reduction of global trade in the steel sector.

Besides the reduction of net exports from China, the fall in global trade has also been fuelled by another two major factors. The imposition of Section 232 in the US, followed by a number of measures applied by major markets in response.

Van Hoey refers to the existing trade barriers in the US and the EU. He notes that while a positive effect of section 232 measures on the US market can be seen, the same cannot be said for Europe.

In the US the section 232 measures were designed to boost domestic industry and they succeeded in taking back capacity utilisation levels domestically to 80% and increasing profitability for steelmakers. Nevertheless, the medium-to-longer term effects are still unclear, mainly because new capacities being built in the US will change the market significantly.

In Europe, conversely, the safeguard measures imposed in response to section 232 did not have a positive effect on the market as EU steelmakers are now registering record low profitability levels, Van Hoey concludes.