After expanding very strongly last year, the steel industry raw materials trades — iron ore and coking coal — are set to grow at much less rapid rates during 2011. The changing pace of the global seaborne movements trend seems clear, although large variations are evident among importing countries.
Through the second half of last year signs suggested that the upwards trend was beginning to slacken, and further evidence pointing to deceleration has emerged recently. However, China’s iron ore imports increased greatly in this year’s first quarter. Conversely, in Japan, steel industry raw materials usage and imports have been disrupted by the devastating earthquake and tsunami.
STEEL INDUSTRY TRENDSFigures for steel industry output show how the main influence on consumption of iron ore and coking coal is progressing. The table below contains quarterly data showing pig iron production at blast furnace mills in Europe, Japan, China, South Korea and Taiwan over the past two years.
These countries comprise a very large proportion of global seaborne raw materials imports.
A strong upwards trend in the total is clearly evident during
2009 and into the first half of last year. Over that period the world economy was recovering from severe recession, and demand for steel rebounded. Second quarter 2010 pig iron output in the group of countries shown, at almost 210mt (million tonnes), was 30% higher than the 161mt first quarter 2009 total, which marked the depths of the recession. More recently, growth has faltered.
Following an overall weakening in last year’s second half, compared with the previous six months, some momentum was regained in the first quarter of 2011. The group’s output rose to 215mt. Production in Europe and China picked-up, although Japan’s volume was flat. In South Korea a vigorous expansion continued, reflecting major new blast furnace steel mill capacity commissioned in 2010.
Looking at last year as a whole, growth rates were spectacular, although in most cases these represented bounce backs from the depressed preceding twelve months. Pig iron production in Europe was 32% higher in 2010, Japan’s volume rose by 23%, South Korea achieved a 22% increase, and China’s output (which had not fallen during the global recession) was up by 8%. But in 2011 the overall performance probably will be less impressive.
CHINA’S IMPORTSDespite stronger steel industry activity last year, China’s raw materials imports declined, after growing rapidly in the previous twelve months. Iron ore imports were 2% lower at 619mt, while coking coal imports were 11% down at 42mt.
The relationship between pig iron production and raw materials imports in China is more complicated than it is in the other main countries. Domestic iron ore and coking coal mines are major suppliers to Chinese steel mills, and their output variations affect buying from foreign sources.
A massive increase in domestic iron ore supplies was a key factor resulting in lower imports during 2010. Chinese mines produced 1.07 billion tonnes last year, a 22% expansion. The quality of this material is typically much lower than most internationally-traded iron ore, and expensive processing (beneficiation) is needed to improve its acceptability, but it clearly has proved competitive.
An upturn in foreign buying this year is widely expected. Iron ore imports in the first five months of 2011 were 8% above the total for last year’s same period, at 283.3mt. Some forecasts suggest that a similar percentage increase over the entire current year is likely. However, prospects for the remaining seven months are not entirely clear. China’s economic growth appears to be slowing, implying a less buoyant steel industry performance in the period ahead.
JAPAN, EUROPE AND KOREA IMPORTSJapan’s steel raw materials imports have become a much greater
focus of attention since the very severe natural disasters occurred in mid-March this year. Continued growth had been expected during 2011, but may not now be achieved. Last year 134mt of iron ore and 73mt of coking coal was imported.
Reductions in Japanese steel usage and output capacity were prominent after the Tohoku earthquake and tsunami caused extensive damage. Disruptions could continue for some time. From later this year onwards, a positive impact on steel production is likely to be derived from massive reconstruction activity, while output in other domestic steel-using industries recovers. Recent Japan Iron & Steel Federation estimates imply only slightly lower steel production in 2011 as a whole.
The European steel industry has regained momentum in recent months after the production trend weakened during the second half of last year.
Economic recovery across the region is still under way, and may benefit domestic steel demand and output further over the months ahead. European Confederation of Iron & Steel Industries estimates point to EU steel consumption increasing by 6% in 2011, implying higher production and raw materials usage.
South Korea’s recent positive trend has been remarkable. Steel output in the first five months of 2011 was over 18% above last year’s same period, a much stronger performance than seen among the other main raw materials importers. Korean steel demand is clearly improving, while the addition of two 4mt annual capacity blast furnace units at Dangjin in the past twelve months has greatly expanded capacity.
Richard Scott