UOB bank
November 2019
Steel is one of the most versatile metals in the world
Steel is probably one of the most versatile metals in the world with very wide applications in many industries. According to market analyses, the top three consuming sectors for steel globally: are building and infrastructure, manufacturing of industrial machinery and the automotive industry. Steel is known for its durability, strength and malleability. Most importantly, it is a highly recyclable material with about 85% of used steel being recycled currently. Steel is also a heavily traded commodity as exports accounted for approximately 25% of world's annual production in 2018.
Demand growth rate for steel will be positive
From the 1.71 billion tonnes (bnt) in 2018, world steel demand is expected to expand annually at 1.9% to almost 1.88 billion tonnes by 2023. Growth in demand is supported by infrastructure development in countries/regions such as India and ASEAN, where demand growth has been strong. Nonetheless, after three years of capacity reduction, China is expected to start increasing steel capacity again after old and inefficient capacity has been displaced. As a result, China's crude steel capacity is estimated to grow 2.5% and 1.8% respectively in 2019 and 2020 reaching 1,067 million tonnes (mnt) in 2020. This will lead the global steel industry into a state of surplus again.
...capacity addition should be more disciplined
As steelmakers' profitability is highly correlated with utilisation rate, excess capacity may continue to dampen steel prices globally. However, the industry is in a much better situation compared to previous years, given the fact that China is moving towards more disciplined capacity addition. At the same time, global steelmakers may also start localisation and build new capacity closer to demand markets in order to circumvent the various anti dumping duties that have been put in place.
UOB has a set of solutions to help players in the steel value chain to explore contract/project financing or structured trade on a buyer led approach whereby the company is within the value chain of a reputable buyer acceptable to the bank. For more information on the above insights and banking solution, please contact us here .
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