Iran: Sanctions to Eat into Exports?
The impact of US economic sanctions on Iran is of
particular interest to the global steel industry in 2019. Iran was slapped with
economic sanctions in August last year and the second phase of sanctions kicked
in on November 4 last. The impact of the sanctions on Iran’s hitherto
burgeoning steel exports will be something to watch out for. Iran exported 7.46
MnT of semi-finished and finished steel products in 2017, as per data furnished
by World Steel Association.
Within this total, exports of semi-finished steel
products such as billet and slab accounted for 6.87 MnT. Now, although total
steel exports inched up to 7.70 MnT in 2018, the rate of growth was far from
inspiring. The adverse effects of the sanctions are already showing.
As SteelMint reported in the last week of December
2018, billet exports had declined by 14% in the first eight months of the
current Persian year compared to the same period last year and prices remain
weak. Likewise, slab exports recorded a sharp decline of 29% during the same
period compared to last year.
India: Steel Exports to Inch Up
After a year of declining volumes, Indian steel exports
could well go up in 2019. First, India could well find itself in the
advantageous position of plugging the gaps left behind by falling exports from
China. Given the fact that global steel prices are witnessing an upward
correction at present, this could mean that the total value of Indian steel
exports could increase.
Second, given the phenomenal capacity enhancement in
the domestic steel sector there is a distinct possibility that capacity
additions could reach a stage when supply would outstrip demand, thereby
enlarging the export basket of the country. To take just a few instances,
Jindal Steel & Power (JSPL) has completed commissioning of a BOF at its
Angul plant in Odisha, the National Mineral Development Corporation (NMDC) is
to start a 3 MnT greenfield facility in Chhattisgarh and the Steel Authority of
India Limited (SAIL) is expanding steelmaking capacity at its Bhilai plant.
Also, since the Insolvency and Bankruptcy Code came
into effect, 30 MnT of idle steel production capacity has been ripe for the
picking. In May 2018, Tata Steel successfully submitted the winning bid for
bankrupt rival Bhushan Steel in an auction. Likewise, acquisitions of
Electrosteel, Usha Martin, Adhunik Metaliks and other plants could result in
heightened production volumes with a significant chunk being earmarked for
exports.
Samarco to Resume Pellet Production
After being forced to down shutters on operations for a
period of three long years, Brazilian mining major Samarco has reached an
agreement for resumption of operations.
The Samarco pellet plant, with an installed capacity of
30 MnT per year, was suspended due to the scary incident of dam failure in
November 2015, resulting in loss of life and property.
Both the companies have received the necessary licenses
required to restart operations at Samarco; however, the plant will restart
operations at a scaled down level of 8 MnT. The halt in operations post
November’15 resulted in increased pellet export volumes from India.
The scarcity of the material in the global market
resulted in increased opportunities for Indian pellet exporters. After The
Samarco suspended operations, Chinese as well as non-Chinese mills shifted
towards Indian pellets to fulfill the demand which resulted in significant
growth in pellet exports from India post 2015.
However, with Samarco resuming operations, supply side
concerns are expected to cease and global pellet prices, likewise, are expected
to ease a bit. But, Indian exports could be hurt in the near and long term.
All Eyes on Indian Iron Ore Mining Auctions
To preempt crunch in supply of non-coal minerals when
288 merchant mining leases expire in April 2020, the government in 2018 amended
the rules for mineral concession and development to pave the way for
re-auctioning of these leases even before their expiry. Early start of the
auction process for these mines, containing minerals such as iron ore, manganese
ore, bauxite and limestone would ensure production is not disrupted for a long
period.
Only 48 mines are operative now. As per the estimates
of the ministry, 101 mines are eligible for auctions. In Odisha, 17 merchant
iron ore leases are set to expire by March 2020. The ending validity of these
mines is set to trigger deficit of 66 MnT of iron ore annually. If other states
like Karnataka, Goa and Jharkhand are factored in, total loss in iron ore
production capacity could be 85 MnT a year. Major mining leases in Odisha
lapsing by March 31, 2020 include the ones held by Rungta Mines, KJS Ahluwalia,
Serajuddin & Co, Kaypee Enterprises and Kalinga Mining Corporation. The
Odisha Mines Department is preparing the ground to auction 31 working mines, mostly
iron ore and manganese leases, which are due to lapse by March 31, 2020.
China About To Go Into Reverse?
Forecasts are that the world’s largest steel market is
about to go into reverse. Production in China will peak in 2018 and then shrink
next year as local demand drops, according to forecasts by leading market
intelligence firms. Mainland steel production, after topping out at 886 MnT, is
expected to drop to 861 MnT in 2019 and hit 842 MnT in 2020, an Australian
government report predicts.
Over the same time frame, Chinese domestic demand is
seen contracting by 34 MnT. China accounts for half the world’s steel output,
and trends in its mammoth industry shape the worldwide market. The expected
drop-off in mainland production is driven by a suite of government policies,
including stricter environmental regulations, supply-side reforms reducing some
loss-making capacity, and a push to cut debt.
According to the World Steel Association, China’s
persistent rebalancing efforts and ever-toughening environmental regulations
will eventually lead to deceleration in steel demand in 2019. However, the WSA
forecasts that despite the trade friction with the USA, if the Chinese
government’s stimulus measures in generating domestic demand for steel by major
investments in the property market and road-building initiatives bear fruit,
then domestic demand in China will receive a much-needed boost. Experts,
though, are unsure whether these stimulus measures will yield the desired
results. It is noteworthy that Moody’s Investor Services, too, has predicted
Chinese demand to remain flat in 2019.
Scrap Imports to Bangladesh Could Spiral
Bangladesh is emerging as the next steel hotspot in
South Asia, with over 2 MnT of steelmaking capacity being added in the country
in the course of the past two years, thereby significantly driving imports of
steel scrap, pig iron and DRI.
With the reinstatement of a stable government, it is
expected that demand will pick up and business will gain the much-desired
momentum. The upsurge in demand is mostly attributable to the government’s
spending in infrastructural projects, which constitutes about 40% of steel
consumption in Bangladesh.
GPH Ispat is expected to start production from its 0.8
MnT EAF, BSRM is likely to add 0.5 MnT additional capacity and another 0.5-0.6
MnT additional capacity is expected to get commissioned in 2019.
Vietnam on Capacity Enhancement Spree
Vietnam is one of the largest steel importing countries
in the world with an annual volume of 14 MnT.
With local steel mills increasing capacities at an
alarming pace, imports are likely to drop in 2019. Hoa phat has announced that
they will increase their production by 33% to 3.5-4 million tonnes in 2019.
Formosa is likely to increase its production to 7 million tonnes in 2019 from
current production of around 4-5 million tonnes.
According to data maintained by SteelMint, Vietnam’s
crude steel production has increased by over 60% in 2018 from 8.94 MnT to 14.4
MnT.
2019 will be a difficult period of countries relying on
steel exports to Vietnam, of which China and India holds major share.
On the other hand, raw material imports to Vietnam will
increase in 2019.
Source: Steel mint