Global manufacturers of steel products in no hurry to stop excess power
According to the World Steel Association (WSA) in July 2012, the global steel production (excluding several countries not submitting their data in this organization) made up 129.7 million tons, which is 1.7% higher than the June figures and 2% ? the result of July 2011. The level of capacity utilization in the global steel industry, however, according to WSA, decreased to 78.7 percent as compared to 80.4% in June ? the lowest value since January of this year, however, judging by the current situation on the steel market, this reduction is not enough to stabilize supply and demand on a global scale. In just the first seven months of this year, the world had melted 895,4 million tons of steel, 1.0% higher than a year ago.
The role of the main destabilizing factor in the global steel market at the present time is China, where due to oversupply of domestic and export quotations fell to its lowest level in more than two and a half years. However, the Chinese metallurgical company to keep up the momentum. Moreover, in July, the industry has established a new absolute record, issuing 61.7 million tons of steel. YTD production in the country reached 417,9 million tons ? 1.4% more than in the same period a year earlier.
Chinese experts explain the excess production of steel products several factors. First, large enterprises are trying to maintain a high level of capacity utilization to reduce cost, in which a high proportion of constant factors. In the current situation, the decommissioning of facilities will only increase losses.
The second problem is that nobody wants to take responsibility and be the first to announce the reduction of release, setting an example to others. This decrease in market share and public recognition of the existence of financial problems, i.e. "loss of face". In previous years more or less mass stop of blast furnaces and rolling mills in China was carried out only under the pressure of "force majeure", be it a global crisis or an acute shortage of electricity on a national scale. Now the situation is not so tense to use extraordinary measures.
Third, prolonged withdrawal capacity means the temporary or permanent elimination of jobs. In China in recent years has exacerbated the problem of unemployment, so the local administration is very sensitive to layoffs and everything to prevent them, using the methods of carrot and stick.
Finally, fourth, the position of Chinese steel companies facilitates low cost of raw materials. Not only steel products, but iron ore, coking coal, and scrap fell to the lowest level in the last two and a half years or more. At the same time, raw material prices continue to fall, thereby lowering the cost of steelmaking.
In addition to China, a significant excess of last year's graphics demonstrate several countries. It is primarily India, where in the first seven months recorded growth of 7.4%, or nearly 3.1 million tonnes compared to the previous year. Despite not the most favorable of local market conditions, steel production in the country is increasing due to commissioning of new capacities. Moreover, in the coming years this process will accelerate.
Increasing production of steel and Turkish steelmakers. In January-July, they gave a little less than 21.1 million tons of steel, ahead of Brazil and just a little behind the Ukrainian. In the same period last year was exceeded by 9.3% or 1.8 million tons According to the forecasts of Turkish experts, in 2012 the volume of production should be 36-37 million tonnes, mostly in Turkey expands production of blanks (more than 15% compared with the first seven months of last year), while the slab was obtained, which is 5.2% lower than a year earlier. These changes reflect the difference in conditions of long and flat products in Turkey and in the countries of the middle East region in General.
Not reduce the growth of U.S. companies. For seven months in the US was smelted to 53.6 million tons of steel, 6.9% more than in the same period last year. Moreover, in the last few weeks quotations for steel products on the American market are growing. This is primarily due to relatively favorable situation in the US economy at present.
At the same time, Europe's steel industry is in crisis. In the first seven months of the current year the volume of production decreased by 4.5% compared to last year. In absolute terms, the decline amounted to 4.9 million tonnes, of which more than half were in Germany and Italy. Moreover, the Italian figures in the near future could be reduced even more. The court of high instance demanded 20 August to suspend the country's largest (and Western Europe in General) steelmaker Ilva until the issue is resolved with a radical lowering of the level of environmental pollution.
Finally, more than 30% reduction in the production of steel in Australia. The largest local steel company BlueScope Steel is in a severe crisis, the primary cause of which is an overvaluation of the Australian dollar. Due to the monetary factor of the company's products less competitive in foreign markets and can't resist cheap imports. At the end of 2011/2012 fiscal year, BlueScope Steel suffered losses in the amount of about $1 billion, and recently was forced to sell Japanese Nippon Steel 50% of its most profitable division, producing high-quality flat products in the United States and the countries of South-East Asia.
In the fall of demand for steel products generally increases. And although this year the rise will obviously be weaker than normal, a metallurgical company, obviously, would not plan for this period the reduction in output. Thus, while in the global steel market did not happen the collapse of prices to the level of 2009, the sector will demonstrate relatively high production volumes.
Victor Tarnavsky
Rusmet.ru