Global Metal Report

Global Metal Report

What to Watch?

  • Management of overcapacity in China (50% of global steel demand and production) highly impacting steel and iron ore prices
  • Upward demand trend in two major end sectors for steel: construction and automotive
  • Levels of anti-dumping measures by countries to block the import of subsidized Chinese steel

Metal id card

Fragmentation
Fragmentation-2 
Internationalization
Internationalisation-2 
Capital Intensity
Capital-intensity-4 
Profitability
Profitability-1 

Sector risk map: Metal

The recovery has begun but overcapacity has not yet been reduced

Global production of steel ended 2016 with a limited rebound (+0.9% after a fall of -3.4% in 2015). For 2017, we anticipate a low increase in volume. China, the first producer and consumer of steel in the world – around 50% market share– posted its 3rd year of declining demand (-4% in 2016 after -5.4% in 2015 and -3.3% in 2014), similar to Russia and Brazil, which contrary to China, were in a severe recession during the period. The rise in demand from advanced countries and India offset the decline of these 3 emerging countries in 2016.

 

With this low level of demand, overcapacities remain high –production in China has not yet been cut despite the rhetoric of Chinese authorities– and the capacity utilization rate remains insufficient, at less than 70%.

 

Yet through a finer management of iron ore production, a reduction in the number of hours worked and thus of volume produced, and an adjustment of high import tariffs against subsidized Chinese steel, steel prices have begun their recovery during the second half of 2016. After reaching a low point, of around 300 $/T at the end of 2015, the price rose to over 500$/T at the end of 2016 (420$/T yearly average). We anticipate a stabilization around 500 $/T in 2017 (+20% in yearly average) but it remains far below the 700 $/T in 2011.

 

 

Key Players

Country

Role

Sector Risk

China #1 Producer
#1 Consumer
Dot-Risk-sensitive
Japan #2 Producer
#2 Exporter
Dot-Risk-medium
Germany #1 Importer

Dot-Risk-sensitive

Strengths

  • Recovery of the European automotive sector
  • Restructuring in the US successfully completed
  • The efficiency of anti- dumping measures against subsidized steel prices

Weaknesses

  • Overcapacity remains very high
  • Low recovery of steel prices, but not yet sufficient enough
  • High fixed costs requiring capital expenditures and funding

Metal Subsectors insights

Iron Ore: A reduction in the number of hours worked –mainly in China– and thus of the volume produced permitted the price rebound.

 

Steel companies: Global overcapacity but the high level of import taxes protects some specific markets such as US and Canada.

 

Non ferrous: Prices remain at a low level, not enough to signal a substantial improvement.

GLOBAL SECTOR REPORTS

picto-aeronautics
Aeronautics
picto-agrifood
Agrifood
picto-automotive
Automotive
picto-chemicals
Chemicals
picto-construction
Construction
picto-energy
Energy
picto-household-equipment
Household Equipment
picto-information-communication-technologies
Information & Communication Technologies
picto-machinery
Machinery & Equipment
picto-metal
Metal
picto-paper
Paper
picto-pharmaceuticals
Pharmaceuticals
picto-retail
Retail
picto-textile
Textile
picto-transportation
Transportation
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