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Top steelmakers 2018 edition

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NORTH AMERICA

Global steel trade, and the much-litigated abuses that can attend it, have been a persistent feature of the North American steel landscape for decades. Last year, and in step with President Donald Trump’s pledge to “Make America Great Again,” international trade not only dominated but drove the market dynamics, mindset, and fortunes of the five US-based steel producers listed in the accompanying table and their counterparts across the North American industry, as well as up and down the supply chain.

In an April 2017 move resulting in what has been described as “the mother of all trade cases,” the Trump Administration self-initiated an investigation under Section 232 of the Trade Act of 1962 to determine if steel imports threaten to impair US national security. Several missed deadlines and some nine months later, in mid-January 2018, the US Department of Commerce submitted its findings in the form of a report to the president.

On March 8 of this year, and after weighing three options put forth by Commerce, President Trump announced that imports of steel products into the US will be subject to a 25% tariff. The decision drew reactions ranging from a mounting flood of requests for exclusions and exemptions to quota-based arrangements negotiated with individual countries. As Metal Market Magazine went to press, steel trading partners in Canada, Mexico and the EU were awaiting a June 1 exemption deadline.

Seemingly undeterred by the Section 232 trade action, or more likely rushing to land product in the US before the tariffs took hold, steel traders upped the ante in 2017. Total steel imports jumped by more than five million net tons, or 15.5%, compared with 2016 volumes, with finished steel imports accounting for an estimated 27% share of the US market. The US capacity utilization rate averaged 75% last year, according to the Steel Manufacturers Association (SMA), a Washington, D.C.-based, primary trade association for electric-arc steel producers.

The double-digit ramp-up in 2017 imports was offset to a degree, however, by a steady strengthening in steel prices and what Steel Dynamics Inc (SDI) president and CEO Mark Millett described in a fourth-quarter conference call with analysts as “an improvement in underlying demand. The automotive sector remained strong and the construction and energy sectors continued to improve,” he noted.

Other events of significance to steel producers playing out in the nation’s capital in 2017 ranged from the bipartisan confirmation of Wilbur L. Ross, a financier with extensive knowledge of the steel sector, as US Secretary of Commerce and then the confirmation several months later of Robert Lighthizer as US trade representative (USTR).

Add to that the signing in late December by President Trump of a sweeping and hotly contested tax reform bill (the Tax Cuts and Job Act) into law. The measure, effective January 2018, creates a single corporate tax rate of 21% – well below the previous top corporate rate of 35 % – and promises to deliver an immediate step-up in earnings, stronger balance-sheets, and an increase in fixed asset investment, which is typically accompanied by a rise in steel consumption.

All five US-based steel producers cited in the accompanying list moved up in global ranking. Nucor Corp, the highest-ranked North American producer, continued to grow its footprint, expanding organically and through acquisition. In late 2017, the Charlotte, North Carolina-based steelmaker announced that it would add a $180-million, 500,000 ton per year, full-range merchant bar quality (MBQ) mill at its existing facility in Bourbonnais, Illinois, as well as construct an “at least” $250-million rebar micro-mill in Sedalia, Missouri.

Last year was a pivotal one for US Steel (USS), which announced the retirement of Mario Longhi, CEO and a key architect of the “Carnegie Way” rejuvenation/rescue plan. David Burritt, president and COO and former top executive at Caterpillar, succeeded him.

A month later, in late-June and after extensive negotiations, USS finalized the restructuring and sale of USS Canada (formerly known as Stelco) to the Bedrock Industries Group LLC – a New York-based, privately funded metals, mining and natural-resource company.
Throughout 2017, and like Nucor and US Steel, SDI, AK Steel and Commercial Metals Co. spent significant time and energy traveling to Washington to attend and testify at a series of Section 232-related hearings.

Closer to home, AK Steel ratified a string of successive labor agreements covering operations at its Mansfield (Ohio) and Dearborn (Michigan) Works, Rockford (Illinois) plant, and AK Tube LLC operation in Walbridge (Ohio). In April, AK opened the doors of its world-class, $36-million Research and Innovation Center in Middletown, Ohio, and in late summer completed the $360-million downstream acquisition of Ontario-based Precision Partners Holding Co, a provider of engineering, tooling, and hot and cold stamped products.

Commercial Metals Co (CMC), which also saw a change at the top with Barbara Smith promoted to CEO in September and adding the title of chairman in November, completed the sale and exited its raw materials trading business last year. And only days into 2018, the Texas-based steelmaker acquired rebar steel mill and fabrication assets from Gerdau S.A. for a cash purchase price of $600-million. The buy added four steel mills and 33 rebar fabrication plants to the CMC fold.

Jo Isenberg-O’Loughlin

CIS

In 2017 the steel producers in the Commonwealth of Independent States benefited from increased steel consumption, after a continuous decline during the previous three years. Consumption reached 52.8 million tonnes in 2017, rebounding from the decline in 2016, when it was 49.4 million tonnes, according to Worldsteel data.

The growth was mainly related to higher consumption in Russia, where steel use improved to 40.6 million tonnes after two years of decline. Steel consumption in Russia started to decrease in 2015, when it fell to 39.4 million tonnes, from 43.1 million tonnes in 2014. In 2016 consumption reduced to 38.2 million tonnes. The economic slowdown in Russia accounted for the reduced consumption.

In 2018, steel consumption in the CIS is forecast by Worldsteel to increase to 54 million tonnes, mainly on expectations of higher use in Russia, where it is predicted to be 41.5 million tonnes.

“In the past two years, we have seen a rebound in the domestic market and in 2018 we expect steel consumption to increase by 3-4%, mainly [due to an] improvement in the construction sector,” Severstal’s sales director Evgeny Chernyakov has told Metal Bulletin.

Novolipetsk Steel (NLMK), Russia’s largest steelmaker, expects that Russia’s 2018 steel consumption will increase by 1.5-2%, and the country’s long-term growth rate will be around just 1%. “The Russian market is too small for us, we can’t achieve our growth goals in this market, considering [the slow] rate of its growth,” Oleg Bagrin, NLMK’s CEO, said.

In contrast to the favorable situation in domestic markets, CIS producers faced challenges in exports. In early October 2018, the European Commission (EC) imposed fixed charges in the range of €17.60-96.50 per tonne as a definitive trade defense measure in the case against hot-rolled coil originating from four countries; Russia and Ukraine were among them.

As a result, Severstal, which received a relatively low duty €17.60 per tonne, managed to continue HRC sales to the EU, but volumes were reduced. Metinvest was able to sell HRC to the EU too, but only when the market was high and the price for its products, including €60.50 per tonne duty, was competitive.

The next shock came from the US, when it imposed the Section 232 tariffs in early March 2018.

Even if Russian and Ukrainian suppliers can overcome the 25% import tariffs in the US, they will meet tightened competition in other outlets, where other global suppliers will redirect volumes away from the US market. In 2017, Russia shipped 2.9 million tonnes of steel products to the US, while Ukraine exported 241,000 tonnes there in 2017, according to data from the US Department of Commerce.

Later in March, the EC launched its safeguard investigation into 26 steel product types to prevent the redirection of imports from the US to the EU market.

Turkey joined in considering trade protection measures in late April by starting an investigation into imports of flat, long and stainless steel, along with steel tube & pipe products.

The investigations in the EU and Turkey will add pressure on the CIS steel exporters. 

In 2017, Russia exported around 4 million tonnes of HRC, almost 40% of which was accounted for by Turkey as the destination, and 9% for the EU, Metal Bulletin estimated on the basis of International Steel Statistics Bureau (ISSB) data. Over the same period, Ukraine exported around 1 million tonnes of HRC, 24% of which was shipped to the EU and 14% to Turkey.

Total finished steel and semi-finished product exports from Russia were around 28.7 million tonnes in 2017, Metal Bulletin Research estimated, based on Worldsteel data. In 2016, Russia exported 31.2 million tonnes and became the world’s third largest exporter. Ukraine exported around 15.4 million tonnes of finished steel and semi-finished products in 2017, MBR estimated. In 2016 total exports were18.2 million tonnes, according to Worldsteel.

In 2017, steel producers in the CIS kept crude steel production unchanged at 102.1 million tonnes, according to Worldsteel data. Russia produced 71.3 million tonnes, which was an increase from 70.5 million tonnes in 2016. Ukraine’s crude steel output was 22.7 million tonnes in 2017 – down from 24.2 million tonnes a year earlier.

Production has reduced in Ukraine because Donetskstal (DMZ), Metinvest’s Yenakiieve Iron & Steel Works (Yenakiieve Steel) and the Makiivka unit, and Industrial Union of Donbass’s (ISD) Alchevsk Iron & Steel Works were seized by pro-Russia rebels in 2017.
The rest of the 8 million tonnes of steel in the CIS were produced by Byelorussia, Kazakhstan, Moldova and Uzbekistan.

In 2018, steel production began to decrease in the CIS. Russia produced 16.6 million tonnes in January-March, which was a decline from 17.7 million tonnes last year. Ukraine has reduced steel output to 5.23 million tonnes, compared with 5.37 million tonnes in the period last year.

Marina Shulga


EUROPE

Support from trade defense measures and increased demand led to higher prices, boosting European steelmakers over the second half of 2017 and in the first half of 2018. But concerns about the increasing threat of protectionism amid the US Section 232 tariffs on steel imports and the potential redirection of steel from the US to the EU market have led to uncertainty in the market ahead of the second half of 2018.
In late April, US authorities postponed until June 1 the imposition of import tariffs on steel and aluminium from the EU, Canada and Mexico. The threatened 25% tariff on steel arises from the country’s Section 232 trade investigation, but the final outcome is still awaited at the time of writing.

The EC started its own safeguard investigation into 26 steel products on March 26 this year, with the intention of shielding the region’s steel industry from the effects of a possible surge in import volumes that could come from material being redirected from the US. Crude steel production in the EU rose by 4.11% to 168.68 million tonnes in 2017, according to Worldsteel, as EU steelmakers took advantage of stronger market conditions.

EU flat steel prices strengthened in the second half of 2017 on the back of higher raw material costs, the recovery of international coil market prices, and positive effects from anti-dumping measures in Europe. The EC imposed definitive anti-dumping measures on HRC from China in April 2017, as well as from Russia, Brazil, Iran and Ukraine in October 2017.

Total steel imports into the EU fell by 1.8% in 2017, reflecting a 7.9% year-on-year rise in the first half of the year and an 11% year-on-year drop in the second half, according to regional steel association Eurofer. Metal Bulletin’s assessment of prices for Northern European domestic HRC gradually rose to €570-590 per tonne on March 7, 2018, up gradually from €485-510 per tonne on July 12, 2017.

ArcelorMittal, retaining its position as the world’s largest steelmaker in 2017, was at the forefront of driving price increases for both flat and long steel products. The Luxembourg-headquartered producer reported an operating income of $2.36 billion for its European operations in 2017, up sharply from $1.27 billion in 2017. ArcelorMittal’s acquisition of Italian steel producer Ilva received conditional approval from the EC on May 7, after it proposed to sell a number of flat steel plants throughout Europe to one or more buyers to preserve effective competition in the European steel market.

Elsewhere, the proposed flat steel merger between Germany’s ThyssenKrupp and the European subsidiary of India’s Tata Steel is expected to be agreed by the end of June this year. The venture is expected to generate annual revenues estimated at €15 billion and to ship about 21 million tpy of steel.

Concerns remain over the ambitious fourth phase of the EU’s Emissions Trading System (ETS), which will run from 2021 to 2030. Eurofer has said that the plan still fails to secure a global level playing field for the region’s steel industry. Negotiations on the reform of the EU ETS were concluded to reach a provisional agreement between the European Parliament and Council in November 2017, after a legislative process which lasted more than two years.

Market participants will also continue to watch UK’s Brexit negotiations with the EU closely, with a continued lack of clarity.
Viral Shah

ASIA

Of all the recent developments in the Asia steel industry, none has garnered quite as much attention as the supply-side reforms in China, where the government has mandated strict industrial policies to control pollution levels.

This included the cutting of at least 120 million tonnes of blast-furnace-based steelmaking capacity in 2016-2017, and another 140 million tonnes of induction-furnace-based steelmaking capacity in the same period. Another, additional, planned 30 million tonnes of capacity cuts is to be completed in 2018.

This has come as a surprise to market participants, who have expected China’s production capacity to drop because of these reforms. However, almost all of China’s major steel producers saw steel production increasing on a year-on-year basis in 2017. This was due to these steel producers increasing their run rates and steel output to fill the gaps vacated by smaller, older and obsolete mills, as well as the induction furnaces producing substandard steel.

China’s largest producer, Baowu Iron & Steel, increased its steel output to 65.39 million tonnes, or by about 2.48%. The percentage increase in steel output at the world’s second-largest steel producer is just about on par with world No. 1 steel producer ArcelorMittal’s 2.53% increase on a year-on-year basis, although the Luxembourg-based steelmaker continues to be the single largest steel producer in terms of production output at 93.1 million tonnes. 

Japan’s Nippon Steel & Sumitomo Metal Corp (NSSMC) increased its steel output by 3.65% to 46.82 million tonnes in 2017, up from 45.17 million tonnes in 2016. China’s Hebei Iron & Steel (Hesteel) reduced its steel production output in 2017, decreasing by 1.91% to 44.06 million tonnes. All of the Asian mills in the top 10 held on to their positions in the ranking.

South Korea’s Posco remained in the fifth position as its steel output was nearly the same as last year at 42.20 million tonnes. Major Chinese producer Jiangsu Shagang, which is known to be the main price setter of long steel in eastern China, kept its sixth position, increasing its output by 15.33% to 38.35 million tonnes in 2017. 

While India’s Tata Steel kept its 10th position, its recent successful acquisition of Bhushan Steel will likely affect the ranking order. It presently has 25.39 million tonnes of steel output, although bringing Bhushan Steel under its fold will add about another 5.6 million tonnes to its nameplate capacity.

Other notable climbers in ranking were China’s Jianlong Group and Valin Group. Jianlong Group climbed after increasing its steel output by 23.13% to 20.26 million tonnes in 2017. Valin Group climbed after increasing its steel output by 11.41% to 20.15 million tonnes in 2017.

As the Chinese government continues to encourage the orderly development of the domestic steelmaking industry, it is likely that more mergers and acquisitions will occur. The steelmaking world is watching with interest as to how the central and provincial governments negotiate mergers as China works to reduce the fragmented steel market and increase industry consolidation.

Once these “mega-mergers” are confirmed, more mega producers are expected to emerge and move their way up th
e output ladder.

Paul Lim

LATIN AMERICA

The Brazilian steel industry spent 2017 trying to recover from its worst crisis ever, experienced in 2016, when several mills cut production levels to adapt themselves to weak market demand. Last year’s crude steel output, local sales and apparent consumption figures improved, but on a poor basis of comparison.

Consumption in Brazil, for instance, increased by 5.30% year-on-year in 2017, to 19.18 million tonnes, according to national steel institute Aço Brasil. This growth, however, was in part driven by higher import volumes, which rose by 23.90% over the same period, to 2.33 million tonnes, against an increase of only 2.30% in domestic sales, reaching 16.90 million tonnes.

Stronger signs of a rebound in the Brazilian steel sector are only being recorded now in 2018. As a result, Aço Brasil had revised upward its forecast for the country’s steel consumption, sales and output this year, due to recovering market conditions. Apparent steel use in Brazil is now expected to rise by 6.9% year on year in 2018, to 20.50 million tonnes, the group said. It also predicts Brazilian domestic steel sales to increase by 6.6%, to 18.01 million tonnes, while the country’s crude steel output is expected to grow by 8.6%, to 37.31 million tonnes.

Gerdau, ranked 20th in Metal Bulletin’s Top Steelmakers list, restarted in March operations at its steel mill at Mogi das Cruzes, Brazil’s south-eastern São Paulo state, due to improved conditions in the local car market. Also, flat steel producer Usiminas, ranked further down the list, resumed activities at its No. 1 blast furnace at its Ipatinga works, in the country’s south-eastern Minas Gerais state, in April, to align output with steel demand now.

But the Brazilian market will return to 2013’s peak level only in 2028, according to optimistic estimates, Aço Brasil noted.

The Mexican steel industry reported positive results in 2017, despite the uncertainties involving the country’s commercial relationship with major trade partner, the US, after President Trump took office. Mexico’s crude steel output increased by 6.20% in 2017 compared with the previous year, to 20 million tonnes, according to national steel association Canacero, with the sector operating at 68% utilization of its installed capacity.

Meanwhile, increased demand from the domestic automotive industry continued to stimulate investments in steel production. In the past couple of years, steelmakers such as Ahmsa, Voestalpine, Tenigal and Grupo Simec have announced investments in Mexico to meet demand from the growing local sector. The car sector in Mexico accounts for around 10.6% of steel consumed in the country, according to Canacero.

Besides being the two largest steel markets in Latin America, Brazil and Mexico have something else in common: concern about the effects of the US Section 232 investigation into steel imports in their local industry. At the beginning of March, the US government imposed a 25% tariff on steel from several countries, as a result of the Section 232 probe.

Brazil was among the nations temporarily exempted from the tariffs until May 1, while negotiations between Brazil and the US about introducing a quota system were taking place. Early in May, the Brazilian steel sector agreed to the US government’s offer to set quotas for steel shipments into that country, thus avoiding a 25% tariff. Producers have agreed to limit their exports to 70% of the 2015-17 average for finished steel products and 100% of the three-year average for semi-finished steel products, although the final details about the measure have yet to be defined, according to Aço Brasil. The quotas should mostly affect Brazil-origin slab exports, whose annual volumes allowed to enter the US market is set at 3.50 million tonnes, to begin retroactively on January 1, 2018.

Meanwhile, Canacero welcomed the decision by the US government to temporarily exclude Mexico-origin steel from its new Section 232 import tariffs, but has voiced concerns about the growth of redirected import flows. The announced US import tariffs of 25% on steel and 10% on aluminium will exclude North American Free Trade Agreement members Canada and Mexico – at least temporarily, while renegotiations of the Nafta treaty continue, according to Trump.

Canacero urged the Mexican government to prevent the local market from being used as a “trade triangulation” environment by exporters intent on redirecting steel volumes previously destined for the US, as well as to defend the national industry from unfair steel imports. In the meantime, uncertainties involving the trade relationship between Mexico and the US remain.

Ana Camargo

MIDDLE EAST


Middle East crude steel production increased by 11.80% in 2017, with a total output of 32.45 million tonnes, compared with 29.03 million tonnes in 2016, according to Worldsteel data. The countries in the total include the United Arab Emirates (UAE), Iran, Saudi Arabia and Qatar.
Steel demand in the Middle East will keep growing in 2018 and beyond, but the region needs trade protection measures to support local producers, according to UAE-based flat steel re-roller and coater Al Ghurair Iron & Steel (AGIS) CEO Abu Bucker Husain.

In an interview on the sidelines of the 21st Middle East Iron & Steel (MEIS) conference in Dubai in December 2017, Husain told Metal Bulletin that because the Middle East (and especially the UAE) has historically been seen as a trading hub, the focus of governments in the region has been on promoting trade and logistics and they have not yet turned to nurturing their domestic manufacturing industries.

He also said the issues of unfair trade practices and dumping by foreign mills had been raised with the local chambers of commerce and the ministry of economy several times since 2009, but that he was still waiting for concrete actions to be taken.

Gulf Co-operation Council (GCC) countries are finding common ground over the threat from steel being redirected as a result of the US decision to impose tariffs on imports following the Section 232 trade investigation.

Saeed Al-Romaithi, CEO of the UAE’s biggest steelmaker, Emirates Steel, said that GCC countries were acutely aware of the issue and are keen to limit the impact of steel being redirected from the US. The GCC countries are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.

“We see positive support from the authorities in the UAE and also in Saudi Arabia in moving to this direction – everybody is seeing what damage is being done and what’s happening to the steel industry in the region,” Al-Romaithi said at Metal Bulletin’s 6th World DRI & Pellet Congress in Dubai in late April 2018. “It’s a bit slow because the whole GCC is linked together [in terms of anti-dumping legislation] but something is definitely happening – the region is lacking the rules and regulations that we need to give us freedom to compete fairly in the market,” he said.

“From our point of view, the demand outlook for rebar [for] 2018-19 looks stable – we have the 2020 Dubai Expo and related infrastructure construction currently going on in the UAE,” Al- Romaithi said. “Right now, the market is still resilient and demand is still there - [and even] if there is not an increase, it will still be stable,” he added.

In March 2018, Saudi Arabia’s National Committee for the Steel Industry (NCSI) called for urgent action to be taken against imports being dumped in the country, specifically by raising import duties. “A report published in June 2016, by the Economic Policies Research Centre in London, points out that, among the G20 [group of industrialized] countries, Saudi Arabia has the fewest legal protection measures implemented,” the NCSI said.

The GCC ministerial committee announced a safeguard duty on imports of pre-painted galvanized coil (PPGI), or color-coated coil of over 600 mm in width in April 2018. The duty will not be applied on products from developing countries whose share of imports in the region accounts for less than 3% individually and less than 9% collectively.

UAE

Crude steel production in the UAE totaled 3.309 million tonnes in 2017, up by 5.08% on an annual basis from 3.149 million tonnes in 2016. Abu Bucker Husain expects steel demand to improve in 2018 and in the years ahead in the UAE and the rest of the Middle East. “[The full] 2018 should definitely be better than 2017 for a few reasons,” he said at MEIS 2017.

“Gross domestic product (GDP) growth should be an overall benefit for all businesses, and getting closer to the 2020 Expo [in Dubai] should be particularly beneficial for our galvanized sector because [increased] demand for galvanized [steel only] comes towards the completion of construction projects,” he added.

Husain also said that there was potential in the Middle East for automotive manufacturing. “If the industrial environment is made more appealing to auto manufacturers, then the big auto makers of the world will come here,” he said.

The country has almost stopped importing rebar since the second half of 2017, while billet imports continue, mostly from Iran. There are several new investments in the country, meaning it will be less dependent on imports in the coming years.

Conares Steel started construction of a new line to produce color-coated coil, or pre-painted galvanized iron (PPGI), early in January. It is being built in the Jebel Ali Free Zone, with equipment supplied by CMI Belgium. Conares Steel also started production at its 250,000 tonnes per year pipe mill in April 2018.

Dana Steel is adding 400,000 tonnes per year to the United Arab Emirates’ coated steel output with the installation of an HDG line and PPGI line in Dubai. United Iron & Steel started to produce HDG in January 2018. Its capacity is 250,000 tpy.

Iran

Iran recorded the highest crude steel output in the region, with 21.726 million tonnes of output, up by 21.41% from 17.895 million tonnes in 2016. The country ranked as the 13th largest steel producing nation in 2017.

However, US President Donald Trump announced his country’s withdrawal from the nuclear deal on May 8 and that the sanctions on Iran will be reimposed. “If Iran has to cut its steel export volumes [because it is] unable to finance deals, it will have to reduce steel output because the domestic market will not be able to consume it, despite recent demand improvements,” an Iranian producer source told Metal Bulletin on May 11.

The Iranian government set a target for steel production of 55 million tonnes per year by 2025. Iran has steelmaking capacity for around 30 million tpy of steel at present, of which 75% would be from direct-reduced-iron-consuming electric-arc furnaces (EAFs). DRI-based steel production is the preferred method in Iran because the country has extensive reserves of both iron ore and natural gas.

Saudi Arabia and Qatar

Saudi Arabia produced 4.77 million tonnes of crude steel in 2017, a 12.65% increase compared with 5.461 million tonnes a year earlier, according to Worldsteel data.

Demand for rebar imports remained weak in 2017, and so far in 2018, as local material was sufficient. In addition, the country removed the ban on rebar exports in late 2017 and the country started to export its products, mainly to East Asian countries. However, local demand for steel is not strong in Saudi Arabia, whose economy is also having hard times.

Qatar produced 2.644 million tonnes of crude steel in 2017, a rise of 4.88% from 2.521 million tonnes a year earlier.

Serife Durmus


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